As the global economy flounders in recession, almost every industry exhibits signs of decline, except for one –Home Security. Where economic uncertainty persists, people place a greater emphasis on security, both to protect and acquire assets. In particular, the home security industry affects a large market and deserves a fair amount of scrutiny. To this end, it is useful to analyze the industry from three distinct perspectives: the market, the competition, and the future.
Home security demand is primarily generated by new home construction and home sales, which diminish in a recession. Still, the security service industry in the United States generates annual revenue of approximately $15 billion, with about 5,000 security companies operating throughout the U.S. Smaller companies tend to be regionally-focused, networking and building a loyal customer base in their respective communities. Larger companies such as ADT and Protection One are de-centralized and focus on providing security to a national market, enjoying the benefits of brand recognition and more resources. Still other companies are in a transitional phase, moving from regional to national. Smith Monitoring, which currently operates in the Texas and Georgia, is in the process of expanding their business scope to include the entire United States.
Given that perceived reliability is paramount in the security service industry, it is understandable that the industry is highly concentrated. It is estimated that the 1 percent largest security companies generate approximately 60 percent of industry revenue. Since most costs are fixed, the volume of customers can often decide the profitability of a home security company. Large home security companies stimulate sales by setting up monitoring centers on a large scale and investing more on marketing and advertising. Smaller companies, often with comparatively smaller budgets for marketing and lower brand recognition, compete through unique regional advantages: lower price, better customer care, and other incentives. Some small companies even resell the monitoring services that they buy wholesale from larger companies to remain competitive.
Both monitoring and reliability have improved as technological innovation continues to influence industry. Home security relies heavily on technology, which is improving and evolving at a quickening pace. Older security systems become obsolete and less effective at preventing or detecting intrusions. The future of home security lies in smart and interconnected technology. Gone are the days of a few simple detectors at strategic locations connected to a simple panel; now, home alarm systems can do more than just sound an alarm when a sensor is triggered. Emerging technology has brought home security to an exciting new level – home automation. The future of home security is interactive networks of connected appliances and sensors, communicating with both the customer and the monitoring company. Advanced systems can connect the thermostat and various appliances to a home computer or smartphone, enabling users to have remote control over their home security even when away. Users can arm and disarm their security system from their iPhone, save energy by turning off their home appliances from their work computer, and switch on lights during their drive home. These kinds of technological advancements allow home security companies to better focus on customer care while maintaining reliability and accenting their plans and features.