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The State of the Connected Home September 2020

techUK

techUK is a membership organisation that brings together people, companies and organisations to realise the positive outcomes of what digital technology can achieve. We collaborate across business, government and stakeholders to fulfil the potential of technology to deliver a stronger society and more sustainable future.By providing expertise and insight, we support our members, partners and stakeholders as they prepare the UK for what comes next in a constantly changing world. techUK.org | @techUK

GfK

To make the best possible business decisions every day, our clients need to know what is happening now, and in the future. They need more than stand-alone data – they need integrated insights and actionable recommendations based on advanced analytics. We love data and science and we understand how to connect the two. And we are passionate about meticulous attention to detail and accuracy. Powered by leading-edge technology, we are in a unique position to leverage proprietary and third-party data to create indispensable predictive market and consumer insights and recommendations. www.gfk.com | @GfK

Contributors

I. The Connected Home Report – Overview

This is the fourth year in a row that techUK, in conjunction with GfK, has published The State of the Connected Home. The report also covers how techUK is working with industry and Government to tackle some of the challenges and makes recommendations to encourage widespread adoption. We have analysed what types of devices the consumers use to control their environment and what role the ecosystem plays.

With polling from 1000 UK consumers, the report highlights how market appeal, consumer understanding and ownership has shifted from 2016, as well as the constraints on uptake. (For this report, references to connected/smart (home) devices or technologies refers to any devices (and associated services) which are either directly or indirectly connected to the internet. Data in this report draws on a consumer survey of UK adults 16+ conducted by GfK on behalf of techUK. The data is weighted to nationally representative profiles. 2016 participants = 1031; 2017 participants = 1002; 2018 = 1000, 2019 = 1000, 2020 – 1000. 2020 fieldwork was conducted between 5 -30 March).

This report is delivered by techUK’s Connected Home Working Group, which works to actively promote and develop further growth of the connected home market in the UK. The group intends to achieve this objective delivering this annual report on the state of the connected home market; showcasing examples of innovation in new technologies and new business models, and engaging with government to enable effective regulation.

II. The Connected Home Market 2020

The global smart-home ecosystem is set to continue its rapid expansion, mostly due to the speed of 5G implementation. Recent IoT investments by Google, Apple, Amazon, or Alibaba, have transformed the landscape noticeably, providing opportunities for various companies.

In comparison, back in 2017, the global smart home market was worth $43.4 billion. Since then, industry revenue has doubled and is expected to reach $91 billion value this year. The statistics indicate the overall market will show an annual growth rate of 15.0% by 2024.

  • Based on our survey, two-thirds of consumers in the UK now say they own at least one smart home product. Only smart TVs, speakers and fitness trackers have levels of ownership into double-figure per cent.
  • While claimed understanding remains high, consumer excitement about smart home devices has weakened slightly.
  • We estimate unit sales growth to be between 6-7 per cent annually depending on exactly which product categories are included. Within core “home/DIY” categories, smart doorbells, sensors, lights all see sales growth of 15 per cent or more year-on-year.
  • Despite relatively low excitement, these “home/DIY” categories are where consumers express greatest interest in buying in the future.
  • Drivers of take-up remain consistent over time, focussed on consumer confidence that devices will be easy to use and will work together with other devices.

COVID – 19 Impact

Smart home

The government has budgeted an initial £2bn for a Green Homes Grant scheme for the stimulus budget, through which homeowners and landlords will receive government grants of up to £5,000 to cover up to two-thirds of the cost of investments to make their homes more energy efficient, for example by installing insulation.

Low-income households will receive grants of up to £10,000 to cover the full cost of such alterations. The government hopes to upgrade 600,000 homes through this scheme and help the country to meet its net zero targets in the process.

It has also created a £1.1bn fund for public buildings, such as hospitals, schools or social housing, to improve energy efficiency. Taken together, these schemes are expected to create 140,000 jobs.

  • Spending on security services will be adversely affected as we enter financially challenging times as happened in the 2008 recession.
  • Do-It-Yourself (DIY) solutions are likely to become more popular as consumers prefer not to have technicians entering their homes thereby reducing expenditures on installation services.

Consumer electronics

  • The disruption to the supply chain in China following the closure of factories and reduction in the workforce has had some impact on most global Consumer Electronics device makers.
  • Close to 50 per cent of the world’s LCD panels for TVs, notebooks and monitors are made in China and a number of LCD factories have been closed. This has resulted in tighter lines of supplies, higher panel prices and an inevitable drop in shipments of end devices.
  • In times of financial distress consumers tend to prioritise spending on the necessities rather than on discretionary purchases. However, with consumers sending more time at home, previous recessions have seen spending on home entertainment relatively buoyant.

Smart speakers

  • On the demand side of things, smart speakers are a lot less expensive than televisions, tablets and smartphones, and even though many consumers will still see them as an unnecessary purchase
  • On the positive side, smart speaker and smart displays with voice and video calling capabilities are increasingly being used for communication purposes and there is the potential for a spike in demand as current owners order products for other family members to use and communicate through. In fact the BBC has recently written about the merits of smart displays for staying in touch virtually with older relatives.

III. Knowledge

Familiarity with smart home devices rose in 2019 with almost 8 in 10 people knowing something of smart home, which has continued into 2020.

Mobile payments, Smart Home and wearables have all seen increased familiarity amongst consumers over the long-term Connected Cars, Smart Cities and 3D printing, however, have all seen declines.

Knowledge of technology trends

Those who have some knowledge of trend (know a lot/a fair amount/a little).

IV. Device Ownership

Ownership of the most popular products, such as smart speakers and smart watches, continues to grow strongly – beyond this, levels of ownership in other categories remain in single figures.

Claimed ownership of smart/connected products

‘I already own or use it’

Smart Entertainment sees continued growth while Smart Energy remains stable. Smart Fitness trackers are the main driver in the Smart Health category.

Ownership within the age group of 25-34 is generally high across all products – with particular spikes in Energy and Health products in comparison to the other age categories. This age group also own the most devices, typically owning smart entertainment and fitness/activity trackers. Smart energy and lighting products are also popular in this age group amongst those most engaged with new technology.

Device Ownership

Comparing claimed ownership/usage against sales reveals a number of insights across categories, particularly where claimed ownership is low relative to recorded sales volumes:

  • Many smart speakers appear not to be in use – though some households may have multiple devices.
  • There seems to be relatively low recognition of the “smart” features of some major household appliances, notably washing machines. Separate GfK research shows that even among those who have bought washing machines with smart features recently, only a quarter cite the smart features as one of the most important drivers of their product choice – far below core features such as load capacity, spin speed and energy efficiency. Equally, many features such as smart diagnostic capabilities may not be seen as “smart” by consumers.
  • Smart speakers are more commonly being used for entertainment and information and not to connect to other smart home products.

Smart speakers are more commonly being used for entertainment and information and not to connect to other smart home products.

Smart speakers usage

Where Smart Speakers are being used to connect smart products together, these are most commonly used to control their Smart TV, Smart Lighting and Smart Plugs.

Devices controlled by Smart Speakers in the home by Smart Speaker owners

Smart home product ownership

V. Drivers of adoption

Smart Entertainment devices are seen to add the most value by making the lives of consumers more convenient compared to traditional alternatives. In comparison, consumers still do not recognise the same value in Smart Health products. It is likely that benefits are perceived to be more virtuous than pleasurably.

Drivers for Smart Home tech

VI. Barrers to adoption

Cost, privacy, and awareness are the key concerns brands should focus on alleviating. The increase in privacy concerns is particularly noticeable in the smart entertainment category (up to 58 per cent from 47 per cent in 2019). The past year has seen a number of debates about whether smart speakers are capturing household conversations all the time and how tech providers use ‘manual’ quality checking to improve voice recognition.

Barriers for Smart Home tech

a. Price sensitivity

Consumers are willing to ‘pay more’ for smart products over non-smart products. However, this proportion is below 50 per cent across all categories and there is still a significant proportion (up to 29 per cent) which prefer non-smart products. We have also seen that a willingness to pay more is down across the board from last year. Smart energy is the exception, however, with - a higher proportion of consumers expecting to pay the same for smart products that increase energy efficiency. There also seems to be an expectation that home entertainment devices are likely to have smart features as standard – a reflection of the maturity of smart TVs and widespread take-up of smart speakers.

Willingness to spend on Smart Home products

Hive HomeShield – giving customer access to a smart alarm system they can install themselves

Hive HomeShield, the Smart Alarm system from Hive, enables users to call on their DIY skill set. Hive has built step-by-step guides supporting the customer to self-install their smart alarm system. The Hive app includes a seamless integration between the physical installation of products and onboarding onto the Hive ecosystem. The in app guide provides details of what is provided in their package, the tools needed for self- installation and step by step drilling/fitting instructions. HomeShield users can benefit from the integrated 'how-to' support videos anytime; offering detailed information on how to fix the Hive Siren and Outdoor View Camera to their home exterior. Throughout the guided process, there are options to request additional support via an expert installer, if required.

Hive HomeShield is the new innovative security system from Hive that puts homeowners in control of their security system.

The smart alarm system brings together the Hive View Outdoor Camera, Hive Hub, contact and motion sensors, as well as introducing the Hive Siren and Keypad.

There is an appetite to spend more on smart products that deliver real benefits. But consumers are yet to associate compelling benefits with broad smart home product categories.

Price sensitivity

Domestic smart energy technologies can improve the lives of vulnerable people including the elderly, those with health problems, or those on low incomes. For example, combined with temperature and humidity sensors, smart meters can help ensure householders have the information they need to make wise energy choices. Or carers could use this information to check that vulnerable householders are not under-heating their home. In countries like Japan energy use patterns which differ from average use patterns are being used to signal to healthcare/social care/family members when an elderly or vulnerable person might require attention. Using energy systems in this way presents benefits for families and carers, healthcare providers, adult social care services within local authorities.

Informetis Europe – InfoCare Assisted Living – Case Study

Informetis is a smart energy solutions provider, based in Cambridge, which uses AI and Machine Learning (ML) technology to deliver innovative services based on energy usage data. Recently, we trialled our InfoCare Assisted Living solution with a small group of users in the Norwich area delivering some interesting results. By installing an Informetis proprietary smart sensor in a Senior person’s electricity fuse board, our technology can ‘disaggregate’ the overall electricity consumption into the individual appliances’ consumption and status (on/off). For example, we can determine when key appliances (e.g. Kettle, Microwave, Dishwasher) have been used. Using data analytics, we can map out the pattern of a ‘normal’ day and issue alerts to the ‘caree’ when this pattern is disrupted.

The key findings of this Trial were that the users really liked the unobtrusive nature of this service (e.g. no cameras or motion sensors), simplicity of use and the ability of the ‘caree’ to monitor on a 24/7 basis without disturbing the ‘carer’. The other feedback was that this service would allow seniors to stay longer in their own homes and thus enjoy a better quality of life; their loved ones felt equally happy that they could keep an eye remotely and unobtrusively. Most importantly, such services would also relieve pressure on government funded social care. Informetis plan to launch this service commercially in 2021.

VII. Connectivity in the Home

The vast majority of smart entertainment device owners say they have connected their TVs and speakers to the home Wi-Fi, with this falling to around half for security devices and domestic appliances. The fact that Wi-Fi connection is similarly low for smart health monitoring devices probably reflects the fact that many will be paired to a smartphone via Bluetooth rather than part of the Wi-Fi network directly.

Connectivity

Smartphones are the number one means for controlling other smart devices – only half of the responders use other devices with smart TVs.

Connectivity control

VIII. The Connected Home Ecosystem

a. Other products

A smart meter is the most popular smart asset outside the products already reviewed. Almost two thirds of smart meter owners also own a smart domestic appliance or some sort of smart energy and lighting device.

Do you own any of the following at your current home?

What other products do consumers own?

Our survey showed that smart energy is one of the areas with strongest interest in buying in future. However, we have also seen that consumers are less willing to pay for smart energy-monitoring features.

Current ownership vs. categories which people say they are interested in buying

Transition to Net-Zero

In 2017, the IEA set out the potential for digital to impact on the energy demand associated with transport, buildings and industry . Smart themostats in homes, automated cars and trucks and mobility-as-a-service and building occupancy sensors were some of the digital innovations considered to have the biggest impact on energy demand.

Digital technologies can mean that we can circumvent the need to nudge behaviour changes through automation – effectively setting a default setting. There is evidence that setting the desired behaviour as default significantly increases adoption of that behaviour .

For example, current trends indicate that most homeowners who have thermostats do not apply settings for optimal energy use. Further, the amount of operational energy used by a building can be reduced by automatically adjusting temperature, ventilation and lighting in accordance with how a building is used. This could be as simple as movement sensors, but newer network-connected sensors and artificial intelligence systems can “learn” the use patterns of a building and anticipate change in advance. These technologies present an opportunity to deliver 15% reductions in building energy use.

b. Post COVID-19 and Energy Management

The lockdown period has transformed our households into offices, schools, and everything in-between and, consequently, domestic energy consumption has experienced a significant rise. We are also seeing that usual patterns of energy use are changing as people find new routines to adapt to life and work at home. An example of this can be seen in recent research from Bulb, which shows households are using 27 per cent more electricity at 1pm compared to pre-lockdown data, as more of us cook and eat lunch at home.

The increased reliance on domestic appliances has boosted the average household energy bill by £16 a month, according to research conducted by USwitch.com. This is a significant change and one that has increased the need to see and understand the immediate impact on your energy use.

We also know that up to 40 per cent of UK carbon emissions are created in the home. While smart meters do help to increase awareness of energy usage, digital technology can help to create the behaviour changes required to make a difference to people’s pockets and their carbon footprint.

Samsung Electronics UK, SmartThings Energy Control – Case Study

SmartThings Energy Control is an exciting evolution of the smart home developed by Samsung with Chameleon Technology, a leading smart energy technology company in the UK, and in partnership with Energy Provider Bulb.

It represents a significant step forward in the way people connect energy usage information and their carbon impact with practical, everyday actions like switching on the washing machine. With the ability to see detailed, up-to-the-minute information about energy usage via the app, and with the power to share that data with everyone in the household, SmartThings Energy Control gives people the power to make informed choices about their energy consumption.

‘SmartThings Energy Control’, a service that runs within the SmartThings app, helps people with smart meters monitor their energy use in (almost) real-time from the convenience of their smartphone or tablet. A simple, free to download app-based service, SmartThings Energy Control enables people to monitor their energy use and connect to their smart tech in a more dynamic, useful way.

While smart meters help increase awareness of energy usage, digital technology can help to create the behaviour changes required to make a difference to people’s pockets and their carbon footprint. With SmartThings Energy Control, we’re taking energy data off the wall and putting it into people’s hands. This innovation takes us into a new era of smart when it comes to energy management. It’s about enabling access to that data in a way that feels natural to people, so households are more empowered to make informed decisions about how to reduce and when to use their energy.

As well as reporting on how much energy usage costs, STEC can also provide data on carbon intensity so households can make greener decisions about when to use energy. Running pre-set oven programmes or dishwasher cycles outside of peak hours will help people to use energy at greener, cheaper times, helping members to save on their energy bills and lower their carbon impact.

Also, SmartThings Energy Control is not just a service for the bill-payer as it enables the whole household to get involved and individually see the impact of collective changes day by day. By working together, the entire household can reduce their overall cost and carbon impact without compromising bill-payer privacy or control.

Find out more about SmartThings Energy Control at www.samsung.com/uk/smartenergy

c. Electric vehicle rollout and time of use tariffs

Octopus Energy provides innovative range of tariffs - underpinned by data, smart technology, and renewables - are incentivising take up of green technologies including solar, EV and energy storage. The company was one of the first UK supplier to really harness the potential of smart meter technology with Agile Octopus, a time of use tariff with half-hourly rates allowing customers to adjust their consumption to times when the wholesale price of energy is cheapest. Now it’s using its smart technology to track what’s going on and off the grid, paying for excess energy supplied by solar panels in homes. EV drivers can benefit from cheaper fees by smart charging at night, helping also to balance the grid. Homeowners can also get support in optimising home energy storage.

d. Smart energy appliances standards and Cyber Security

The government is working closely with Ofgem and industry to support the transition to a smarter, more flexible energy system. The Smart Systems and Flexibility Plan (SSFP) sets out a suite of actions to facilitate the deployment of smart technologies in homes and businesses. Smart technologies drive decarbonisation can help consumers save money and improve the efficiency of our energy system - saving the UK an estimated £17-40bn by. The purpose of this PAS is to enable standardised control of energy smart appliances on an electricity network to:

  • match the short-term availability of intermittent generation sources such as wind and solar renewable energy;
  • decrease the peak load on transmission and distribution networks and so to alleviate the need for network upgrades to handle new domestic appliance types, such as electric vehicle (EV) chargepoints and electric heating, ventilation and air-conditioning (HVAC) systems;
  • allow control of electricity network characteristics such as line frequency, system inertia, network voltage and provide immunity from network and generation outages; and allow electricity suppliers to offset their short-term market imbalance by controlling flexible load on the network.

An “Energy Smart Appliance” or ESA is defined as a communications-enabled device able to respond automatically to price and/or other signals by modulating or shifting its electricity consumption. Services provided to the electricity network through this consumption modulation are known as “Demand Side Response” or DSR. DSR could give consumers new options to help them manage their electricity usage, allowing them to schedule usage for times or to vary it on demand to save money. Widespread use of load control could also allow better and more cost-effective balancing of supply and demand, reducing the costs associated with predicted or unexpected peaks and helping to provide security of supply as well as helping with the integration of renewables. This could potentially reduce expenditure on building generation capacity and reinforcing the transmission and distribution networks, contributing to keeping energy bills as low as possible for households and businesses.

DCMS Secure-by-Design

The Department for Digital, Culture, Media and Sport (DCMS) on the Proposals for regulating consumer smart product cyber security. This is the culmination of long-standing efforts between Government and industry which started with the voluntary Secure by Design Code of Practice for consumer IoT security.

techUK overwhelmingly supports efforts to improve the security in the consumer IoT space and sees these regulatory proposals as an important step in helping to stamp out poor security practices in the sector, which can act as a significant barrier on the take-up of consumer IoT devices. The principles behind this legislation have the potential to positively impact the security of devices made across the world and industry has been encouraged to see the Government work with international partners to ensure a consistent international approach to IoT security. Indeed, it is vital that these proposals ensure harmony with other markets, supporting UK business rather than adding complexity in terms of standards or customer communication.

e. Data ownership and privacy

Smart home assistants capture a wide range of data; creating detailed profiles of the user, often with information gathered from numerous connected devices. This allows services to be tailored and targeted to actual consumer needs. However, the use of this data could also raise questions with consumers.

With the introduction of GDPR and recent controversies in the news, data privacy is likely to become an ever-increasing issue in the connected home space.

In 2018 the government set out its vision to modernise consumer markets. Harnessing the power of data is central to this pledge. The government’s vision is for an economy where consumers’ data works for them and not against them. techUK works closely with BEIS, to see consumers able to use their data to make informed decisions about the best products and services and for the switching process to be seamless. If consumers choose to grant them permission, third party providers should be able to use consumer data to develop new innovative products and services that are tailored to consumers’ individual needs and requirements. BEIS is also supporting charities, regulators and others to use data to support vulnerable consumers. Data needs to be smart: easily and instantly accessible to consumers and be able to be safely and securely transferred to third party services who can use this data to provide innovative services for consumers.

techUK’s team is working actively with regulators and industry on data strategies.

You can read more on the subject of data strategies here:

VIII. Conclusion

The essence of the smart home is the interconnection of multiple devices – and the ability of some of those devices to monitor or control others. True smart homes are not collections of smart devices, but of connected devices plugging in to a few smart hub devices – each of which is, in turn, connecting to the broadband router.

Familiarity amongst products remains similar to our findings from 2019. The data shows two-thirds of people now own at least one smart home product: that truly is mass-market adoption. Even if we exclude people who only own smart TVs or smartwatches, we still have 47 per cent of UK consumers with smart home devices.

The strong growth of smart speakers over the last few years (7 per cent ownership in 2017, to 29 per cent in 2020) has made these the poster child of the connected home. However, when it comes using smart speakers to control other devices at home, less than half of owners are doing this. We are more likely to ask Alexa to play music, give us the news or weather, and tell us a joke than to switch on the lights or turn down the thermostat.

Despite relatively low excitement, “home/DIY” categories are also the ones where consumers express greatest interest in buying in the future. Drivers of take-up remain consistent over time, focussed on consumer confidence that devices will be easy to use and work together with other devices. However, there has been an increase in concerns around privacy – principally around smart entertainment devices. This may be driven by concerns around always-on, voice-activated devices “listening in” to conversations. techUK remains fully involved with the development of data policies and working across government.

Manufacturers and retailers will find it helpful to have a clear view of the different “smart” and “connected” layers within smart homes. They also need to remember that many smart devices are not actually very smart – so the challenge is to make them sexy enough to entice purchasers. That can be done by focusing your marketing on how products overcome any consumer concerns about smart home complexity as well as core benefits.

Call to Government for Action:

  • While we very much welcome the fact that smart thermostats are in scope of the Green Homes Grant, future programmes directed to buildings need to focus on the whole range of smart products that can help residents manage their energy and heat.
  • The Ministry for Housing, Communities and Local Government's (MHCLG) should recognise the future benefits of connected homes in the context of net zero and develop a smart homes programme to support and stimulate its deployment.
  • Government departments should continue to work closely with techUK and its members as they develop data strategies, ensuring that consumer concerns around privacy and security are front and centre.

Credits:

Created with images by Angelov - "Smart home technology interface on smartphone app screen with augmented reality (AR) view of internet of things (IOT) connected objects in the apartment interior, person holding device" • Stanisic Vladimir - "All in one smart home control system app concept on tablet display in man hands" • Gorodenkoff - "In the Electronics Store Professional Consultant Shows Latest UHD TV's to a Young Man, They Talk about Specifications and What Model is Best for Young Man's Home. Store is Bright, Modern." • Andrey Popov - "Girl Looking At Wireless Speaker" • Monkey Business - "Grandmother Sitting In Chair With Granddaughter Watching Movie On Digital Tablet Together" • fizkes - "Rear view at little careless child girl exploring house playing turning light switches, home electricity danger security, electric shock risk and kids safety, energy power saving concept, copy space" • Daisy Daisy - "Woman At Home Boiling Kettle For Hot Drink With Smart Energy Meter In Foreground" • oatawa - "Woman hand holding smart phone with graphic icon multichannel online banking payment network communication" • Monkey Business - "Family With Baby Daughter Sitting On Sofa At Home Looking At Laptop Computer"