The Business of Smart Appliances

The industry is split on smart appliances, but your next fridge or washer will probably connect to the Internet anyway. Part three in our series about smart appliances.

Appliances don’t change very often. Most machines are more efficient than they were 15 years ago, and probably have a few extra buttons and settings. Still, despite the best efforts of engineers, real innovation has been elusive.

But white goods are finally on the cusp of a rare shift. Smart appliances are beginning to appear at your local retailer, and whether you want them to or not, your next washer or fridge will probably communicate with the outside world. It's up to the major industry players to find a way to make these changes stick.

The State of the Industry

Smart appliances are not big business yet—at least not within the scope of the entire industry. In 2012, smart appliances sales totaled a modest $613 million, according to Pike Research, a fraction of the worldwide bottom line.

But that isn’t stopping a few manufacturers from trying to make the future of smart appliances happen right now. Samsung and LG are leading the charge most enthusiastically. Samsung’s approach to smart appliances so far has been one of flashy spectacle, with touch-screen refrigerators.

LG, on the other hand, has introduced subtler smart tech. They do have appliances with LCDs—in the TV series Arrested Development, the refrigerator in the Bluth model luxury home was an LG with an LCD, and that was back in 2002. But they’re best-known for appliances that can self-diagnose operational failures, and communicate that info to your smartphone or to customer service.

Smart Diagnosis
LG's Smart Diagnosis feature is a pragmatic use of smart tech, allowing a malfunctioning appliance to communicate diagnostic codes to your smartphone. It's like an incognito smart appliance.

Both LG and Samsung are based in South Korea, one of the best-connected countries in the world. The location gives these two companies an advantage for gauging response to smart appliances. “We have a test pad for a lot of our technologies in markets which are highly, highly, highly adoptive of technology,” said Kurt Jovais, vice president of home appliances marketing at Samsung Electronics America. “But they’re small markets, ultimately. So the U.S., being a very large market…is very attractive to us. That’s why we will see a lot of evolution [of smart appliances] in the U.S.”

Most high-end brands haven't even broached the subject of smart appliances yet.

Other manufacturers are approaching the trend more cautiously. Wolf and Sub-Zero make a few models that can interact with mobile devices. Whirlpool is testing a suite of appliances with smart-grid support in Chicago this spring. Some Kenmore appliances are manufactured by LG, and come with a self-diagnosis feature. Bosch is sitting out entirely, waiting for the industry to agree on a cross-brand communications standard. The upshot of such an agreement would be that all smart appliances could communicate with each other. But a number of brands haven't even broached the subject of smart appliances yet.

Industry analysts and experts are split on whether the connected home (and the smart appliances in it) will catch on this decade. In a recent Pew Internet survey of more than 1,000 so-called “technology stakeholders and critics,” 51 percent of respondents agreed with the statement that by 2020, “the Home of the Future that has been foretold [will be] coming closer and closer to becoming a reality.” But a full 46 percent of respondents agreed with the opposite statement: “Once again, the Home of the Future does not come to resemble the future projected in the recent past.”

Making It Happen

Manufacturers and analysts can speculate all they want, but the success or failure of smart appliances will be determined where the rubber hits the road—by consumers and retailers. So far, it’s slow going.

“I don’t think that we have customers coming in and asking for smart appliances,” said Bob Baird, vice president of merchandising for The Home Depot. But he’s convinced that consumers will inevitably adopt them.

For most consumers, smart features aren’t even on the radar yet. “I don’t think that we have customers coming in and asking for smart appliances,” said Bob Baird, vice president of merchandising for The Home Depot. But he’s convinced that consumers will inevitably adopt them. “It’s going to happen,” he said.

Michael Poirier of Poirier Appliance Sales and Service, based in Norwood, Massachusetts, agrees on both counts. Poirier is a relatively small, two-store company, and neither location stocks many smart appliances yet. That’s partly because consumers aren’t asking for them, but mainly because manufacturers aren't making many.

Still, Poirier does see a future for smart appliances, particularly those that can alert owners about serious malfunctions like a leak in a dishwasher or broken climate-control on a cooler filled with vintage wines. “The concepts are great, and it’s going to benefit everybody,” he said.

Baird notes that consumers might not intend to buy a smart appliance, but end up with one anyway. Many of LG’s appliances have the Smart Diagnosis feature, so consumers who purchase an LG washer or refrigerator end up going home with an incognito piece of smart tech—whether they want it or not.

Consider 3D television. As consumer technologies go, it’s widely considered to be a flop. At any given time of the day, viewership barely registers in the Nielsen ratings. But after just three years on the market, there are an estimated 20 million 3D-capable TVs in homes across the U.S.

3D television is widely considered to be a flop. But after just three years on the market, there are an estimated 20 million 3D-capable TVs in homes across the U.S.

How did that happen? Well, TV manufacturers started including the feature in their mid-tier products. LG made a great 32-inch 3D TV last year, and it only cost $650. Vizio has a number of small- and mid-sized 3D sets for under $1,000, too. So if you buy a TV with a reasonably large screen, smooth motion, and Internet connectivity, there’s a good chance it’s also 3D-ready. Consumers still don’t seem to care, but if there’s finally something worth watching in three dimensions, millions of homes will be ready to try out 3D TV.

Smart appliances could follow a similar adoption pattern. In five years, it could become commonplace for fridges, dishwashers, and laundry machines above a certain price point to come with features like self-diagnostic systems, smart grid compatibility, remote control via smartphone, or even a touchscreen.

Even now, basic smart features don’t seem to add much to the price of appliances. One of LG’s front-loading washing machines with Smart Diagnosis lists for $799 at Home Depot, right in the middle of the category’s price range. (The showiest smart appliances, though, are still super-expensive—like Samsung’s $3,999 T9000 touchscreen fridge—and the food-aware, grocery-ordering fridges on the horizon aren’t going to be cheap, either.)

Whether the future of the industry lies in sensational, self-aware features envisioned by space-age dreamers, or simply with sensible, shrewd features like smart-grid readiness, connected appliances will become big moneymakers over the next few years.

Next week, we’ll look more closely at the future of smart appliances. In the meantime, check out the rest of our series.

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