Parks Points

Each year, Security Sales & Integration and Parks Associates partner to complete The Residential Market Report, a survey of electronic security dealers and installing security contractors.

Now in its fourth edition, the survey has multiple purposes. First, it provides current business metrics for security dealers. Because security dealers have participated in the survey for several years, trending is also available. By comparing multiple years, we can provide insight into changing business conditions.

In addition, the survey probes for security firms’ adoption and sale of products and devices at the edge of their core business, premises security systems. Again, this helps dealers know what their colleagues and competitors are doing, arming them with information important to compete effectively.

Finally, the survey can help identify areas of new interest or increased interest. A great example is the surge in IP cameras.

The Annual Residential Market Report fielded online responses between Aug. 18 and Sept. 25. This has proven to be another solid business year for security dealers, albeit not forecast by Parks Associates to be as robust as 2015 or 2014.

The latter experienced much higher than standard growth as the economy began its recovery and pent-up demand was clearly demonstrated in the market. With a net of nearly 2.8 million new security system sales (after attrition and replacement calculated) in 2014, the following year experienced strong but more normal net sales of about 2 million systems.

As this year nears its end, Parks Associates forecasts 2016 net sales slightly lower at close to 1.9 million systems. After several years of recovery, the remainder of the decade will bring a fight for targets and increasing needs for competitive differentiators.

Read on to see why embracing smart home technologies in particular will be a smart decision — 65% of survey respondents now include smart control features in installations — and how other factors such as labor rates and monitoring fees are shaping today’s security market and solutions.

Assessing the Security Landscape

Nearly 50% of this year’s SSI and Parks survey respondents are sole decision makers for their firms and firm owners while more than 80% are sole decision makers or managers who share in the decisions of what to offer and what not to offer.

Approximately one-quarter of respondents are from firms providing monitoring while a larger percentage — 62% — offer monitoring through a third party. Only 10% claim to offer no monitoring at all.

As ever, small firms dominate the security dealer landscape. About 50% report revenues less than $1 million while one-quarter report revenues exceeding $5 million. Small firms can act quickly in the face of competition or changing conditions, but also have disadvantages in certain areas.

For instance, credit lines are imperative, and decisions as what and whether to add new capabilities can be difficult due to risk and scarce resources in both people and money. Being first to adopt a “new” capability is often impossible or unwise.

However, so is being last to adopt new capabilities. This year shows that a majority — more than 60% of dealers — now offer some level of interactivity for their traditional systems.

The message for those dealers that haven’t yet adopted such capability: do that soon. Parks Associates estimates a total of 14,000-15,000 security dealers operate in the U.S.; many are small and serve local geographies.

The top six types of systems sold by security dealers between 2013 and 2016 are reflected in the chart above, and note the percentage of security dealers selling IP cameras, CCTV, structured wiring and smart home devices has increased — the impact of the latter, in particular, was revealed as it jumped 8 percentage points from its initial listing in the survey last year.

The network security cameras category has risen from being offered by 62% of responding dealers in 2013 to 81% today. They are fast becoming table stakes. In addition to categories that are increasingly sold by security dealers, several have declined — some dramatically — over the same span.

“No new wires” networks shrunk from having 34% of dealers selling them in 2013 to only 21% today. Home computer networks dropped at the same rate. The percentage of security dealers selling and installing audio systems has dropped from 40% in 2013 to 30% in 2016, while home theater held steady with 25%-30% of dealers at least offering those installations.

To read the full study, visit Security Sales & Integration.

Further Reading:

• Majority of U.S. broadband households willing to pay more than $20 per month for comprehensive smart home system
• Market Snapshot: Disruptive Forces in the Home Security Market
• The Evolution of Security and Smart Home