Automated home concept creates new CE frontier - consumer electronics

DSN Retailing Today, August 21, 2000 by Laura Heller

The home of the future holds a romantic lure in the consumer electronics industry. It is the jewel in the crown that promises to make life easier, connecting appliances to each other and consumers to a more controlled, convenient life. It has been discussed, debated, flaunted and eagerly awaited for many years, but it finally seems to actually be within reach.

Each major manufacturer had some facsimile of the home of the future on display at the Consumer Electronic Show (CES) in Las Vegas last January. Panasonic had a working model set up somewhere in Japan, and Intel had a sample home built off-site. Cisco debuted its version last month near its headquarters in San Jose, Calif., and together with co-sponsors Sears and Whirlpool is now using it to help educate builders on how to provide the proper inner workings and connections needed to make the home a reality.

In short, the home of the future will operate much like a home network system. Home entertainment products will be synched together, and a single remote will control all products. You can order video on demand, lower the shades and dim the lights while the monitor does double duty as a video intercom system or video phone. Consumers will have remote access to turn on outside lights as they near home, adjust the heat or air conditioning, monitor the sprinkler system and even warm up the Jacuzzi after a rough day at work.

Most of these applications are dependent on broadband service. According to Jared Headley, consumer solutions manager at Cisco, the Cisco home was built to show the possibilities of ubiquitous Internet access. The project is targeted to educate builders, so that new homes and remodels will have the appropriate wiring and internal technology to make the home of the future the home of today.

By sponsoring the Cisco project, Sears is getting an aggressive foot in the door in a category where it has historically excelled. In spite of some faltering businesses, Sears is still the nation's No. 1 seller of major appliances, and it has the largest home installation business. Its role in the home of the future promises to be strong provided it stays at the forefront of changes in this category.

And changing it is. The appliance retail market is currently going through some fairly dramatic changes. Home Depot is busy rolling out the sale of major appliances in its entire store base. Lowes has leapfrogged Circuit City to become the second largest retailer in the category. Circuit City subsequently announced last month that it would exit the category, refit all its stores solely with CE and home office product, and cancel plans for an appliance only format it was to test in three markets.

Best Buy is stepping up its presence in the category, and two weeks ago announced the addition of Kitchen Aid products to its inventory. According to Dave Kielly, merchandise manager, Best Buy believes the product line appeals to the retailer's core customer, which it describes as technologically savvy. The retailer is also improving its home installation and services business to support the growing category.

And with smart appliances that will be connected to the Internet just around the corner, CE chains such as Best Buy are betting that the nature of such products will make them a more natural source in consumers minds; particularly since the home of the future will be more than just new appliances.

"There will be connections going into the kitchen, but whether through major appliances is yet unproved," said Wade Fenn executive vp of marketing for Best Buy.

But the high-profile products are major appliances such as Whirlpool's refrigerator with a touch pad that scans bar codes, keeps a running shopping list and has the ability to submit a grocery list to an on-line shopping service for home delivery. According to Zen Yinger, a Whirlpool spokeswoman, this prototype along with a similarly advanced oven is currently being showcased at various shopping malls around the country, and a selection of integrated home appliances will be available in select markets in the first quarter 2001.

Smaller portable devices are expected in stores by yearend such as a Sunbeam alarm clock that can sync via satellite to maintain exact time. The unit can also be used with an adapter to control every clock in the house and maintain time even in the event of a power failure.

While pricing for the major appliances has yet to be determined, it's unlikely that these new high-tech products will be prohibitively expensive. "The issue will be, is there a price tag increase and how big will it be?" said Trisha Parks, president of Parks Associates, a Dallas-based market research firm specializing in network connections. Parks suspects that many of the new "smart" features will greatly reduce operational costs, so manufacturers will institute minimal markups on the retail side.

For example, a washing machine that allows for a system scan could allow a remote software fix or enable the service department to dispatch the proper technician with the appropriate parts and tools. This feature alone represents huge cost savings to vendors and service providers.