IoT in Smart Appliances: How to Unlock its True Potential
An advertisement pops up on the refrigerator’s touchscreen door, informing you that you can buy your favorite ice cream for 20% off this week. As you sip coffee, your phone notifies you that the laundry is done. Finally, vacuuming is a chore of the past as the autonomous vacuum cleaner begins working as soon as you leave, five days a week.
Connected devices can manage almost every aspect of the home. The Internet of Things (IoT) in home appliances, specifically, could translate into higher levels of customer satisfaction and more business for your company. The smart home is no longer a rose-colored daydream, television cartoon, or whimsical speculation. It’s the future, and it’s happening now.
The market for smart appliances is primed. Almost half of internet-connected households have some sort of smart home device, with thermostats, smart home systems, and smart appliances topping the list. The global smart home market is predicted to be worth $289 billion by 2030. Already, households worldwide own over 131 million smart speakers. That number is expected to nearly triple by 2027, to 337 million. Based on 2022 data from Statista, we can anticipate global ownership of smart security cameras, large appliances, and small appliances to roughly double by 2027.
Despite tremendous technological advances, there is still plenty of progress that must be made to create an automated, seamless “Iron Man”-style smart home. Well-positioned competitors have the chance to make a significant impact on the smart appliance market.
New Business Opportunities with IoT in Home Appliances
Smart appliances are nothing new. Brands have had the ability to connect these devices for years but have struggled with finding a meaningful value proposition. They can make a washing machine talk to a dishwasher, but so what? Where's the ROI?
Here are some ways developing connected appliances can prove value for brands.
1. Create Ongoing Relationships with Customers
Appliances used to be a once-in-a-decade purchase, but times are changing. The consumer mindset is shifting to expect regular product upgrades as companies consistently produce new, innovative models with cutting-edge features. While the average customer will wait several years to make another appliance purchase, that doesn’t mean they will be content with their purchase. They’ve been conditioned by their consumer electronics device spend to expect new capabilities from devices on an ongoing basis, which means OEMs need to determine ways to increase the long-term value of the purchase.
This perspective marks a transformation in the business-customer relationship. The end of the interactions is no longer the sale. OEMs have an opportunity to become more personalized, data-driven and continuous service providers.
Smart appliances can help develop deeper relationships by contributing to the customer experience in different ways, such as providing tips on how to use the product, gleaning feedback on the product’s quality and supplying access to related goods and services.
According to HubSpot's 2023 consumer trends survey, 78% of people are more willing to share personal data with a brand they trust, and 65% of respondents said trust is the determining factor in whether they share data with a brand. This level of trust in personal information presents businesses with an opportunity to display targeted messaging to help customer loyalty. The proper protection and use of customers’ personal information can lead to an increase in a brand’s most desired outcome: loyalty.
2. Explore New Revenue Streams
This new, continuous relationship also creates new business models. According to Jabil’s smart home survey of 202 IoT decision-makers, 23% of respondents believe artificial intelligence (AI) will be a disruptive technology to their smart home products. Participants noted that AI could collect data from IoT devices and predict user behavior, which would ultimately help brands provide more personalized offers via advertising and elevate the level of whole home automation.
The promise of advertising on appliances is not necessarily just about coupons and commercials. It is about brands interacting with customers after the purchase.
Thinking back to our original example, if your fridge knows your favorite ice cream brand, it has an opportunity to serve product recommendations or coupons as encouragement for future purchases. By anticipating consumer needs and consistently producing value, savvy marketers can secure a customer’s loyalty for life.
Other potential revenue streams include:
- Freemium model and service subscription, where businesses give customers access to a free version of a service with the option of paying a periodic fee to upgrade to a premium account
- Everything-as-a-Service, which in this context refers to the digitization of home appliances, thereby remodeling them from an analog product to an essential services provider
- Predictive analysis to help you organize and understand incoming data, which in turn, allows you to take intelligent actions, such as preventative maintenance
Generally, smart home OEMs are developing the solutions they believe hold the biggest opportunities for biggest market success. For example, more than half (53%) of survey respondents are producing indoor appliances like refrigerators, washing machines, and vacuums, and 60% think these solutions will be most successful on the consumer market.
3. Establish Strategic Partnerships
Partnering is a critical strategic skill in an ever-evolving and expanding industry. It can fill in capability and feature gaps, align solutions with customer-preferred platforms and ecosystems, and reduce time-to-market by utilizing another company’s resources and relationships.
Approximately three-quarters of the participants in Jabil’s Smart Home survey said they work with manufacturing partners when they require solutions outside of their company’s typical scope. Seventy-six percent choose to buy modules for their solutions instead of making them if the technology is outside the company’s core competencies.
Partnering also creates an opportunity to work with the community. For example, a company that sells smart refrigerators can partner with the local grocery store for automatic food delivery; both entities get business, and the customer has a more positive, seamless experience.
Technical Development Challenges of IoT in Home Appliances
Smart appliances present brands with various opportunities, but none of them can reach their full potential without overcoming technical challenges first. Here are four elements that companies must consider as they build their connected solutions and expand IoT in home appliances.
1. Improved Security and Data Protection
Consumers often cite security issues as a leading cause for concern in connected solution development. Unfortunately, as numerous cyber-attacks have proven, this fear is far from unfounded. According to a 2022 Deloitte survey of U.S. connected device users, 50% are concerned about security breaches, while 49% are specifically worried about hackers taking over their smart home devices.
A 2022 consumer survey from Parks Associates and Assurant found that nearly half (48%) of the respondents who don’t have smart home devices said they were “very concerned” about data privacy — indicating a continued barrier to adoption of these devices. Privacy concerns may be the most difficult to assuage as people try to get comfortable with the increased accessibility of data.
According to Jabil’s 2023 survey, 89% of participants said their solutions collect data through sensors integrated into devices, while 87% use smartphone apps and 76% use HMI interactions. Perhaps for precisely the reason of data privacy, many fewer participants collect data through methods that require highly personal consumer information. Only 33% use cameras to gather data, and only 24% use microphones.
Also, smart home companies are increasingly building security into the devices themselves. Ninety percent of survey respondents said they include security technology in their solutions, with the most common being Secure Element, Edge AI, and PKI.
In recognition of the need for more standards and transparency around data security in smart home devices, the Connectivity Standards Alliance — a group of industry leading companies that developed the new smart home standard Matter — launched the Data Privacy Working Group in early 2023. The CSA “is exploring the creation of a harmonized global specification and certification program” to help consumers better understand how data is being collected and used by their devices and if their devices comply with the forthcoming standards.
Companies need to offer enhanced security features if they hope to persuade customers to trust smart appliances with some of their most valuable possessions — home, data, and family. Strong data security practices are essential to success.
As the number of smart devices in a household increases, interoperability becomes less of a perk and more of a necessity. It also creates an opportunity to develop a category of solutions to manage a wide array of smart devices, encourage user adoption, supply full data sets, and simplify payment for up- and cross-selling opportunities.
Like the human central nervous system, each device will need a common platform (or a “brain”) for consumers to control their devices. That ecosystem is expected to be Matter, the smart home standard released in October 2022 that is being adopted by everyone from Google and Apple to Amazon and IKEA. Nearly three-quarters (73%) of Jabil survey participants expect their company will integrate Matter into their solution portfolio within the next year.
It is unlikely that a customer will stick with one brand for every appliance or device that they own, so OEMs can stay competitive by ensuring device connectivity within a broad ecosystem. We saw in Jabil’s smart home survey that OEMs are largely using brand-specific interoperability standards now — like Alexa (83% of respondents), Google Home Assistant (65%), and Apple HomeKit (63%). However, they expect to investigate emerging, brand-agnostic standards like Securifi and Domoticz, in addition to Matter, over the next half-decade.
Voice-activated assistants often serve as that central overseer. Already, they enable customers to control their lights, entertainment settings and even appliances literally without lifting a finger, and Amazon and Google are working to expand the conversational user interface to include personalized responses with contextual comprehension. For example, you could ask your voice assistant if there’s any traffic on the way to work, and because she recognizes your voice and knows your office address, she can alert you to an accident on your normal route and suggest a different one.
However, responses to Jabil’s survey show that even next-generation smart home consumers still prefer to interact with their devices using familiar remote devices like smartphones or tablets. Users can put specific information directly into apps that control whole-home hubs or specific appliances according to their exact preferences. At this point, these apps are foolproof and have little margin of error — unlike a voice assistant that may ask you to repeat your request and still add the wrong item to your shopping list.
3. High Cost
One of the biggest inhibitors to the purchase of a connected home product is price. Two-thirds (66%) of survey respondents said materials costs are the production challenge impacting their smart home solution the most.
The good news is that this is becoming less of a problem; prices are stabilizing after reaching pandemic-era highs as supply is replenished. The price of MEMS (micro-electromechanical systems) sensors, which are used in smartphones, has also stopped rising but has yet to decline significantly.
Prices for materials and manufacturing may be decreasing, which could provide some relief, but the conversation doesn’t end with cost. OEMs need to educate consumers on how smart appliances can save money, like lowering energy or utility bills, or add convenience, like vacuuming the home while you’re away or notifying you of a needed battery replacement. Furthermore, brands must think about the true value their connected device brings to the customer — just because a product is connected, it doesn’t mean it’s valuable.
4. Legacy Components
The electronic component shortages we faced during the pandemic massively impacted the production of IoT devices, but 2023 has finally brought relief. However, OEMs must still pay attention to the availability of older components used in the products.
Each smart appliance has its own product lifecycle, and the same concept applies to the components used in these devices. As various components become obsolete, they cripple a brand’s ability to keep up with market expectations and could potentially hurt revenue and profits in the long-term. OEMs must devise a solution to make product redesign an ongoing part of their strategy or risk lagging behind the curve in a constantly evolving industry.
There is plenty of opportunity in IoT in home appliances and it is only a matter of time before brands start taking full advantage of it. The challenges, in the meantime, will be solved as costs come down and standards are further defined.
Download the 2023 Smart Home Technology Trends Survey Report
Insights on technology adoption, industry opportunities, and biggest challenges from over 200 IoT decision-makers at smart home and appliance OEMs.