Navigant Research Blog

Continual Change for the Smart Homes Market

— May 19, 2017

The smart homes market, an important segment of the broader Internet of Things (IoT) market, is continuing to develop through partnerships, acquisitions from a variety of incumbents, and startups with point solutions. 2016 saw many acquisitions in the IoT market, and 2017 seems to be just as promising. With the number of partnerships, acquisitions, and new offerings, it’s clear the smart homes market will also continue to thrive. While there are many new players, the market is seeing consolidation through these partnerships and acquisitions. This consolidation may encourage further development of the smart homes market by mitigating issues such as interoperability—a barrier to adoption.

Expansion through Acquisitions and Partnerships

One of the most recent acquisitions in this market is the purchase of iDevices by Hubbell, an international electrical manufacturer. Hubbell offers a range of solutions for residential, commercial, industrial, and utility applications. iDevices, a smart homes company founded in 2010, has a number of Wi-Fi and Bluetooth-enabled products for connected power, lighting, and climate control—including a connected thermostat, lighting sockets, and dimmable, color-tunable, and scheduled lighting. The acquisition will allow Hubble to further its offerings in the smart home and IoT market by leveraging iDevices’ products, which are compatible with the Apple HomeKit and Amazon Echo.

Rather than an acquisition, Vivint Smart Home—a smart home solutions provider—is looking to grow sales of its offerings via increased adoption through a partnership with Best Buy. The partnership will allow Vivint to sell smart home products in 400 Best Buy stores. It also includes placement of a Vivint employee within each of the stores to better assist customers. This is the first time Vivint Smart Home solutions will be sold within brick-and-mortar stores. Vivint hopes the new aspect of its business will help alleviate one of the largest barriers to adoption of smart home devices: lack of consumer knowledge.

Creating Competitive Advantage

In the quickly growing smart homes market, it is important to gain and maintain a competitive edge. Smart homes vendors are working to differentiate themselves by creating a unique value proposition. The largest companies are working to further expand into the space and maintain market share through acquisitions. On the other hand, smaller companies are looking toward partnerships with larger players like Amazon Echo and Apple HomeKit.

Within the smart homes ecosystem, connected lighting plays a significant role. A recent report, Navigant Research Leaderboard Report: Residential Connected Lighting, analyzes the companies that currently have residential connected lighting offerings available on the market. Thanks to partnerships, acquisitions, and integrated offerings, these companies gain an advantage in the smart homes and broader IoT markets.

Through evaluation of the strengths and weaknesses of these products, it is clear the companies that will continue to grow are those that have created a strong value proposition. As smart home applications gain more traction, it is vital for survival that companies continue to uniquely position themselves in this shifting landscape.

 

100% Renewable Energy by 2050

— May 15, 2017

In April 2017, the City of Portland and Multnomah County in Oregon committed to 100% renewable energy by the year 2050. Ted Wheeler, the mayor of Portland, said, “While it is absolutely ambitious, it is a goal that we share with Nike, Hewlett-Packard, Microsoft, Google, GM, Coca Cola, Johnson & Johnson, and Walmart. We have a responsibility to lead this effort in Oregon.” Other cities in the United States have also committed to renewable goals. Chicago, for example, has committed to 100% renewables for its municipal buildings and operations by 2025. Renewable goals are often tied with increased efficiency in buildings, as this assists in reducing the overall needed energy production, making it easier to rely more heavily on renewables.

At a National Level

Following in footsteps of Portland’s ambitious goal, Oregon Senator Jeff Merkley (D), Vermont Senator Bernie Sanders (I), and Massachusetts Senator Edward J. Markey (D) introduced legislation for the United States to reach 100% renewables by 2050. This 100 by 50 Act creates a plan for 50% of US electricity to be generated by renewables by 2030 and 100% by 2050. Additionally, it would require zero carbon emissions vehicle standards and ban government approval of oil & gas pipelines.

Both Merkley and Sanders understand the importance of local initiatives to propel these aggressive renewable energy goals into reality for the country as a whole. “Starting at a local, grassroots level and working toward the bold and comprehensive national vision laid out in this legislation, now is the time to commit to 100% by 2050,” said Merkley. Sanders already sees these changes occurring, and he believes in the importance of not being limited: “In Vermont and all over this country, we are seeing communities moving toward energy efficiency and we are seeing the price of renewable energy plummet. Our job is to think big, not small.”

The 100 by 50 Act is the first legislation introduced to Congress aimed to completely eliminate fossil fuels for the United States. While it is unlikely such a progressive proposal like this will initially pass, it opens the doors to additional discussions and ideas. The declining costs of renewables provide further incentive to assist in a shift toward greater reliance on renewable energy, such as solar and wind power. Local community initiatives and the individual sustainability goals of leading US companies are helping create a future that does rely 100% on renewable energy. Coupled with these siloed goals, members of Congress will continue to push toward more encompassing legislation, though it will inevitably be a long and trying endeavor.

 

LEDs Experience Growth but Commercial Lighting Market Revenue Declines

— April 7, 2017

According to the US Energy Information Administration (EIA), lighting in the commercial sector (which includes commercial and institutional buildings) and public street and highway lighting consumed 11% of total commercial sector electricity in 2016. LEDs provide more efficient lighting alternatives to traditional lighting options–such as incandescent, fluorescent, halogen, and even compact fluorescent lamps in the commercial market. The increased efficiency, decreasing prices, and longer lifespan of LEDs have spurred their growth in the lighting market. Lighting is considered low hanging fruit for efficiency upgrades in commercial buildings, as these technologies are cheaper than other building upgrades focused on efficiency.

Decline of the Commercial Lighting Market

According to Navigant Research’s recent report, Market Data: Energy Efficient Lighting for Commercial Markets, global lamp revenue is expected to decline at a 0.8% compound annual growth rate (CAGR) between 2017 and 2026. The decline is modest due largely to the expected number of replacement lamps needed for burnouts during the forecast period. While total global market revenue is expected to decline, LED revenue is the only lighting technology revenue expected to experience growth during this time. The total global number of lamp shipments is expected to decline at a quicker pace than revenue due in large to part higher priced LEDs.

Lamp Revenue by Lamp Type, World Markets: 2017-2026

(Source: Navigant Research)

The Implications 

When we think of a thriving market, we think of an ever expanding market where there is room for all interested parties to get a piece of the pie. However, due to LEDs’ increased efficacy, long lifespan, and continued market penetration, the overall lighting market is declining. This means there is an oversaturation of lighting manufacturers that will experience revenue declines.

The declining market is experiencing fierce competition. Smaller companies are suffering because they have less resources and might not be equipped to compete against the largest lighting incumbents. In order to stay competitive, lighting companies must shift how they generate revenue. Today, lighting companies are finding alternative ways to generate revenue that are changing the lighting industry. Some companies have been successful with new technologies, such as visible light communications for indoor positioning, some are expanding their lighting controls offerings, and others are experimenting with new business models, such as lighting as a service. Lighting companies will need to define their offerings and demonstrate their competitive edge to solidify their place in the changing lighting landscape.

 

Lighting-Based Indoor Positioning Gains Momentum

— March 22, 2017

Advances in technology are changing the consumer experience. Online shopping and omnichannel retailing are becoming increasingly important for consumers because of easily available product knowledge, price comparisons, coupons, and quick access to products. Another technological advancement changing the consumer experience and shifting the retail market is indoor positioning. In brick-and-mortar retailing, indoor positioning has gained traction in recent years as retailers adapt to the changing retail landscape and align their online and physical store shopping experiences. Lighting companies have taken notice of the changing retail landscape and are staking their claim to retail indoor positioning through visible light communication (VLC) and other indoor positioning technologies, such as Bluetooth Low Energy (BLE). The ability to combine these technologies for enhanced indoor positioning solutions is progressing the retail experience for consumers.

Partnerships and Acquisitions

The most recent partnership to advance light-based indoor positioning was announced by Philips on February 27, 2017. The company announced the creation of its Location Lab partner program, which brings together companies working to develop applications for Philips’ indoor positioning system utilizing VLC for “the power of GPS indoors,” as described by Philips. The new partnerships will enhance and customize indoor positioning across multiple industries, including retail spaces, offices, and malls. Philips’ location-based service partners with Aisle411, Favendo, Adactive, and other international companies. The IT and systems integration partners include SAP, Microsoft, and Capgemini, and the in-store technology partners include SES-imagotag and Zebra. Philips Lighting has also teamed with Blue Jay to improve operational processes.

Another lighting incumbent, Acuity Brands, has recently furthered its indoor positioning offerings. Acuity’s advancement of indoor positioning occurred through internal advancements as well as several acquisitions. In April 2015, Acuity Brands acquired ByteLight—a company developing indoor positioning technology—by combining VLC and BLE. In January 2016, Acuity acquired GeoMetri, which is a software and services platform provider for mapping, navigation, and analytics. These strategic acquisitions enable Acuity and Philips Lighting to be leaders in this space. On March 28, 2017, Acuity will host a webinar in conjunction with Navigant Research on adding value to a shifting retail market through indoor positioning.

Application

In Europe, other retailers are deploying indoor positioning, working with a variety of lighting manufacturers for new systems. Zumtobel has deployed indoor positioning at E.Leclerc, which is a hypermarket in Langon, France. However, unlike Philips, Zumtobel used Bluetooth without VLC for indoor positioning because it prefers Bluetooth over newer VLC technology. OSRAM took a similar approach by using Bluetooth and not VLC for indoor positioning in Switzerland. A fashion retailer purchased the Bluetooth chipsets to install existing lights in 23 stores throughout Switzerland for indoor positioning. While OSRAM does sell luminaires with a built-in Bluetooth transmitter, these were not used for this project. In collaboration with Favendo, Philips has installed the company’s first indoor positioning system in the supermarket EDEKA Paschmann in Dusseldorf, Germany. The system will allow shoppers access to the location-based services, as well as allow employees to more quickly search for items.

Going Forward

While the deployment of indoor positioning systems utilizes the combined technologies of VLC and BLE, these systems are still limited. One of the major barriers to the quick adoption of these solutions is the privacy concerns of consumers. Educating consumers about these technologies and the benefits enabled through indoor positioning will allow for greater adoption by retailers, and it is clear these solutions will be more commonplace in the future. Retailers are already capitalizing on the benefits these solutions provide to customers, employees, and retailers. This trend should continue as more companies realize the potential of lighting-based indoor positioning.

 

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