Author(s): Peter Bryer
The penetration rate of refrigerators in developed markets is about 100%. It's the same for most major household appliances; the addressable market is saturated. Makers of the impressive new connected white goods on display at CES 2015 know that practically every family already has what they're selling, minus the Wi-Fi and the good looks.
The market for home appliances isn't like the market for most consumer electronics products, and certainly nothing like the market for handsets. In many Western markets, consumers upgrade their smartphones every two years thanks to contract expirations and subsidies. In the US, it's closer to every 20 months. This is in stark contrast with the market for appliances like refrigerators, ovens, washing machines and dryers.
The blazingly fast upgrade and replacement cycles of smartphones create massive scale, drive down component costs, and push new technologies and services across a continent in record time. CCS Insight believes, for example, that most consumers will first experience Ultra-HD screens and cameras on smartphones thanks to market absorption over a few years. This in turn enables new content, apps and services in record time.
However, nothing of the sort happens to white goods. CCS Insight is considering the typical life expectancies of household appliances to add a sprinkle of reality to the excitement about the large number of products being unveiled at CES 2015.
According to industry reports, the average refrigerator lasts a family 14 years, with many now surviving up to 20 years as quality and efficiency have improved. Refrigerators purchased recently can be expected to be replaced in the year 2028 or beyond. Many households will be running a 20th-century model for years to come.
Washing machines and dryers tend to last families for more than 15 years, and electric range last up to 20. The average dishwasher lives a dozen years, and even microwaves can last a decade or more. These aren't disposable items, and CCS Insight believes it's unlikely many families will rush out to replace functioning appliances with more sophisticated, connected counterparts.
The product adoption cycles for these smart appliances will seem unusually long for those accustomed to the tight cycles seen in many segments of the consumer electronics industry. It could lead to sceptical market observers, but this shouldn't distract from the development of the connected home. The Internet of things will work its way through different industries at different paces. The complete connected home won't happen overnight: it will be a slow shift, not a sudden disruption.
For such durable, big-ticket items, a different timescale mind-set is required. Companies like LG and Samsung are demonstrating appliances that stress aesthetics and connectivity as much as core functionality. However, sales expectations should be tempered by real-world data. It could take a decade or even a generation before such connected things reach mainstream.