company, iControl Networks, will initially target two verticals – security and energy – and the products will be available before Christmas on 24-month contracts. It is a logical step for the carrier to also retail internet-connected products that rely on its network. However, analysts question whether early adopters will be deterred by the need to lock into a 24-month contract for bleeding edge technology. “We’ve heard a lot about the promise of the Internet of Things, and our ambition is to make this meaningful and accessible to everyday Australians,” said John Chambers, executive director, home and premium services at Telstra. “Telstra Smart Home brings real benefits, from knowing exactly what time your kids get home from school, to checking in on the wellbeing of your mum who lives alone, to knowing that your garage door is closed, your dog is in the backyard and the iron is turned off when you leave the house.” Electrical retailers including JB Hi-Fi and Harvey Norman already range similar products from Netgear, Belkin, Philips and Swann Security. Chambers told Inside Retail Weekly that Telstra has been careful with the timing of the product launch, waiting for both technology and customer understanding to mature. “Our research suggests that customers are now ready for this. They are starting to see the genuine life-enhancing use cases,” he said. “When we went to our target customer base we had over a third of them say, ‘we are ready to buy right now’. That was exciting to us. We feel as though the time is right, as opposed to too early or too late. But we have been very careful about the timing.”   Foad Fadaghi, MD of analyst firm Telsyte, told Inside Retail Weekly playing in the smart home space is a way for carriers to differentiate themselves from other ISP competitors. But he warns that traditional electrical retailers could have an advantage over the telco. “It’s a question of whether or not consumers are comfortable locking themselves into long-term contracts with carriers for these kinds of services,” Fadaghi said. The challenge for Telstra is that 24 months is an eternity in consumer technology, which may become outdated in six months, disappointing early adopters. “That marketplace where people are experimenting, it does definitely suit the retailers more [than carriers] because they can sell products piecemeal or introduce people to various aspects of the product ecosystem and keep adding to them. They also don’t necessarily require people to take out longer-term subscriptions,” Fadaghi said. “That’s one of the things Telstra doesn’t really understand. It tries to apply its 24-month mobile plan strategy to almost everything. It doesn’t really work unless it’s a repayment plan for a large investment such as an expensive computer or an expensive phone.” Smart home opportunity Telsyte sizes the market opportunity for connected appliances at $3.2 billion by calendar 2019. This compares to the current appliances market size of around $5.8 billion. However, analysts from Citibank point out that the connected home market is not additive to the existing appliances and broader electronics market. It will ultimately replace existing products as they come to the end of their lives. The Good Guys CEO, Michael Ford, predicts that the connected home concept is an emerging one. “I think [the connected home] is still a couple of years away,” Ford said. “It is talked about a lot in the same way e-commerce [was]. Its strength was talked up very aggressively in the early 2000s, [and] it’s only really emerging 15 years later.” Smart homes are an attractive proposition for manufacturers. A key benefit of this innovation is to justify a premium ASP (average selling price) with additional features which customers value. The addition of internet connectivity will also allow manufacturers to keep track of products after they are sold for servicing, recalls or updating software. Samsung, for example, is committed to connecting 90 per cent of its new products to the internet by 2017 – and 100 per cent by 2020. With more products naturally becoming technology products, such as in gardening or lighting, more retailers will enter the smart home space. Retailers outside the electrical category are continuing to increase their coverage of technology products. For example, Bunnings is going after the DIY smart home and garden market, while Aldi disrupted the tablet market by retailing sub-premium tablets. “There is definitely a focus on these emerging product categories for non-traditional electronics retailers,” Fadaghi said. Telstra Discovery Store Fadaghi expects to see more retailers outside the electrical category playing in the consumer technology space, especially if the market continues to consolidate. “If there is consolidation in the electronics retailer’s space, it’s likely that manufacturers and distributors will look for partners that are outside of the box to try to expand their reach and keep their retail partners from becoming too powerful as buyers.”    Pre-empting product lifecycles Richard Umbers, CEO of Myer, recently summed up the difficulties surrounding consumer electronics retail. “It’s a tough industry to be in,” he said. “Technology is hard to get right. I come from the supermarket world and I think of it like fresh food — it’s got a sell by date.” A sharp knowledge of inventory as well as understanding the shortening product life cycles is critical for electrical retailers. In the case of emerging technologies such as virtual reality or wearables, retailers need to understand how long it takes for people to become aware of the technology, when will it take off and when it is going to die down. Fadaghi points to product lifecycle in the tablet market, which boomed in 2013, slowed down in 2014, and eventually “fell off a cliff”. The timing of that cycle will vary between different categories, however Fadaghi said the adoption of technology will be a lot quicker these days than in previous years. “That causes some challenges down the track, all the growth happens in the first couple of years, then it’s really hard to maintain that level of growth or even sales,” Fadaghi said. “For these retailers it’s very much about catching the wave of adoption at the right time, because if you miss it, you could be very much stuck with stock you can’t sell.” Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.