2021 Home Automation Deep Dive: Pro Installs Rebound, Sales of Security System Adjacencies Increase
Home security systems installers are experiencing a post-pandemic push, but like COVID-19 itself the recovery remains ongoing. SSI’s 2021 Home Automation Deep Dive also shows companies expanding their offerings while dealing with the encroachment of DIY competition.
Professional security dealers responding to the Security Sales & Integration and Parks Associates 2021 Home Automation Deep Dive survey show positive results for 2020. Nearly 60% of dealers report revenues of at least $3 million versus 51% reporting the same in 2019.
This marks the eighth year SSI and Parks have collaborated on this residential security and smart home market study (see Methodology box). There is, however, a small drop (from 35% to 31%) for revenues greater than $5 million, but that may be margin of error.
Only 22% of responding dealers report revenues for 2020 of less than $1 million, versus 31% reporting the same in 2019. That is a significant reduction in dealers with less than $1 million in revenues, pointing to an uptick in sales for small dealers.
For 2021, a year still in progress, dealers anticipate steady or good results. Fewer dealers project significant drops in revenues for 2021 while more than half anticipate about the same results as 2020. Nearly 20% foresee revenues higher in 2021 by at least 10%. Given COVID-19’s continuing weight on citizen minds and actions, these are strong results — results that are envied by many industries.
Before addressing the drivers and inhibitors at both the consumer and dealer level, a few more 2021 stats are noteworthy.
Pro Installs Rebound
Installing dealers report an average of 34 system sales per month, down 10% from 2020 (Figure 1). There may be some margin of error in play, but more importantly an increasing percentage of installing dealers are selling security system adjacencies such as video cameras, video doorbells and smart garage door openers.
These increase revenue per sale culminating in higher revenues overall. While profit margin may not always be large for hardware adjacencies, dealers do not usually sell devices below cost … as they often do security systems.
Some unit decline is attributable to DIY security systems sales. Dealers recognize this threat. Recent security buyers report increasingly high rates of DIY purchase. Thirty-nine percent of security intenders (based on 1-7 scale, with 7 = certainly will acquire) report that they will purchase a DIY system for security in Parks Associates’ consumer research. Dealers rightly identify DIY security systems as a strong threat to their business.
As all dealer survey respondents must in-stall residential security, nearly all (96%) offer professional monitoring. The average ARPU is $42 per month across all services (Figure 2). In Parks Associates’ consumer research this year, respondents report paying their monitoring provider nearly $48 per month, but that number does include other services like video monitoring.
The 96% of dealers that provide monitoring report different average monthly fees by services adopted. Predictably, fees increase with services beyond basic 24/7 monitoring. This reality offers installing dealers an opportunity to both shine and increase profits.
Monitoring Beyond Perimeter
Figure 3 depicts services beyond standard monitoring that security dealers report selling from 2018-2021. Of note are the significant increases in the number of dealers selling video verification, aging-in-place and vehicle monitoring.
There are big jumps for video verification and vehicle monitoring services. Both of these generate strong revenues to dealers offering the services. The jump in vehicle monitoring offerings is the result of Vivint, Ring and Alarm.com, among others, all having started offering that service.
Their reasoning, in turn, is at least in part due to the rapid increase in car thefts. The increase in video verification is absolutely a natural follow-up to the increased installation of cameras with security systems. In 2Q 2020, Parks Associates’ consumer research shows 38% of security system owner households owning security video cameras and 31% having a video doorbell.
With security cameras in about 34% of U.S. broadband households, these percentages translate to ~10-12 million households. Thirty percent of security system intenders also report high interest in video cameras and video doorbells.
The decline in personal emergency response systems (PERS) has at least three causes. First, it is now an old-fashioned nomenclature.
Second, many smartphones now offer “alerts for falling.” Third, PERS is understood to be a single alarm, typically a panic button worn as a pendant. Today’s aging-in-place offerings are more robust. They certainly may include a wearable panic button, but they may also include cameras, alerts, video, reminders and more.
Moreover, they are evolving rapidly to become system packages including multiple helpful tools. As that continues and increasing numbers of U.S. consumers age into their late 70s and 80s, ample opportunity will emerge. These package offerings, if carefully wrought and reliable, will merit significant monthly fees from seniors and their families eager to keep them at home as long as possible.
Powerful Security Drivers
Outside forces helping dealers achieve good volume in 2020 and through the first quarter of this year are strong home sales, particularly the increased number of second home acquisitions. Parks Associates’ consumer data for 1Q and 2Q show 4%-5% of broadband households (107-111 million) purchased a home in the 12 months prior to the surveys.
Many of those acquisitions are for moving households; others are second homes. Those strong home sales, in turn, were driven by COVID restrictions and low mortgage interest rates.
On the negative societal column, but good for a desire for higher security, murder rates jumped in 2020. While overall crime declined a bit, vehicle theft surged, according to the National Insurance Crime Bureau (Figure 4), increasing 9.2% between 2019 and 2020.
In Parks Associates’ 2021 consumer survey, 34% of broadband households report feeling less security in their homes than they did five years ago. Thirty percent of households report that the general unrest in the nation has increased anxiety and insecurity.
The resultant effect is the quest for peace of mind — a benefit of security systems. Note in looking at the strongest consumer drivers reported by installing dealers (Figure 5) that the desire for automation/smart home trumps both the outside drivers of crime increases and moving households — by 3x!
Installing dealers offering these devices integrated with security systems hold key cards for higher revenues and margins. While the hardware devices may not have high price tags, the integration of devices with security systems that enables easy consumer control and automation as desired is worth high dollars.
Further, consumers have systems in their homes that require routine maintenance; the most obvious are HVAC and sprinklers. The security industry must begin the education of consumers to the concept that home systems that include, but are not limited to, security will need maintenance.
High-end households already have some awareness of this, but most consumers have not yet recognized this coming reality.
System Acquisition Inhibitors
SSI and Parks Associates also asked dealers to select their key inhibitors to security system sales (Figure 6). The findings are telling. While automation and smart home devices are front and center as drivers, they do not even make a showing on the inhibitor list.
The top-ranked most powerful inhibitors are competition from DIY players and disruption of the supply chain. The supply chain disruption is caused by COVID-19 and chip shortages.
Selling against DIY systems includes facing some pricing challenges, but also includes feature and brand challenges now that many DIY players offer monitoring and installation, if desired. Moreover, and importantly, leaders of DIY are offering smart home devices along with their security systems.
The difficulty of finding trained, or even untrained but trainable employees, is the third highest-ranked inhibitor by dealers. Dealers join a chorus of companies across industries with open positions and inadequate hiring options.
COVID-19’s Continuing Effects
The current year shows a dramatic difference compared to 2020 in dealers’ responses about the effect of COVID-19 on security system unit sales and smart home device sales (Figure 7). The continued, albeit lessening, hesitancy to have installers in the home remains.
However, most dealers have learned how to assuage concerns by careful masking and distance. In 2020, there was a low percentage of increased unit sales due to COVID-19 (Figure 8).
2021 Survey Methodology
▶ Security Sales & Integration and Parks Associates have teamed on this residential market survey for eight years.
▶ This year’s online survey was fielded to SSI’s dealer audience from Aug. 16 to Sept. 13, 2021.
▶ As an incentive to complete the survey, qualifying respondents (residential U.S. installing security dealers) were offered a $25 gift card and chance to win $500.
▶ In all, 268 dealers participated, the highest volume the study has achieved to date.
In 2021, the percentage citing unit sale increases due to the pandemic increased to 33%. Declines in unit sales attributed to COVID went from 60% in 2020 to 46% in 2021.
Looking Forward to 2022
Dealers’ unit sales for 2021 are lower than 2020. At this time, a strong majority of dealers expect a status quo (that is sales within 10% of 2020) for next year. The threat from DIY security systems and some single devices like cameras and video doorbells is real.
They also present continuing and increasing opportunity for enterprising dealers willing to take on the task of integration across devices and security systems. That technical skill merits strong fees and will earn loyal customers if service is timely and reliable.
More headway will occur for aging-in-place services. COVID-19 has and will be a lasting inhibitor to assisted-living facilities. Seniors want to stay at home as long as possible.
Technology that is well thought out can help that strong desire. At the end of the day, installing security dealers are faced with ample residential and home automation opportunities. Those opportunities bring their own challenges along with rewards.
View the slideshow for the an entire view of the deep dive.
Tricia Parks is Owner and CEO of Dallas-based Parks Associates.
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