What the Vivint/Best Buy Partnership Can Tell Us

Vivint’s decision to partner with Best Buy is a deal that will put Best Buy and Vivint’s branded smart home offerings in more than 400 electronics stores across the U.S. The deal represents a first for both companies: Vivint has built its business through its own direct customer sales operations while Best Buy’s smart home offerings have previously been limited to offering a range of off-the-shelf devices only. The move will draw the interest of smart home providers and those still on the sidelines alike.

Under the terms of the deal, dedicated Vivint kiosks will go into selected Best Buy large-format stores during July through October this year (2017). The kiosks will be manned by both Vivint and Best Buy employees selling a managed smart home system and devices under the moniker, Best Buy Smart Home powered by Vivint.

The in-store offering brings packages that include installation with pricing starting at US$700. A monthly subscription fee is levied in addition to that, priced at US$40 for monitored security services with the complete range of smart home services, including video monitoring at an additional US$10 a month. Best Buy, for its part, will leverage smart home consultations to advise customers on other related products serving streaming media, TVs and home theaters, major appliances, Wi-Fi networking, and more.

According to Vivint, the deal was finalized after the initial Best Buy in-store trials, which were in operation earlier this year. Additionally, from July through October, the partners have scheduled kiosk installations at a rate of around 40 stores a week. Initial markets were in the San Antonio, Detroit, Denver, and Salt Lake City areas. 

Vivint’s smart home business was built upon a door-to-door sales model that still blitzes residential areas aiming to sign up and deliver an installed smart home system within days. Vivint is confident that its installer and planning operations are capable of integrating retail sales with the same efficiency. That will be key to ensuring margins are maintained in its retail efforts.

But, also behind its high-touch, door-to-door strategy, is a belief that the majority of consumers still need to be introduced to the potential of a smart home system, as well as walked through which applications and devices can work together in a single system. The Best Buy partnership carries the same emphasis on consultation shifted from the doorstepto the retail floor.

But the deal signifies more than just a change of customer engagement location. Vivint’s business has also been built upon long contracts—typically three to four years—where the cost of the devices and installation are borne by Vivint until the later stages of the contract when the contract moves into profitable territory. For Best Buy, the same systems will be sold with consumers paying up-front for the hardware and installation. The up-front offering isn’t unique to the Best Buy package; as ABI Research noted earlier this year, when Vivint launched its Flex Pay option. Both Flex Pay and the Best Buy offering come with the offer of a credit line from Citizens Bank.

The Vivint/Best Buy partnership will be tracked with interest by smart home players from Vivint’s traditional monitored security business, but also from a host of retailers considering their own managed smart home offering. In the U.S., retailer-led smart home systems have had a mixed ride. Home improvement store, Lowes, led the way, and its Iris offers continues to grow some five years after its launch. In fact, bringing it into direct competition with Vivint and home security vendors, in May, Lowes added monitored security for Iris for an additional US$15 per monthly subscription. However, office supply store, Staples, ditched its Connect managed smart home in August last year after a three-year run.

Even so, a host of retailers around the world are exploring their ability to offer managed smart home servicesto protect their existing customer relationships, as well as driving new revenue.

But the real learnings will come from the blending of up-front costs and long contract payback. Smart home in the U.S. has so far been a market dependent upon long contracts—and typically monitored security—to drive revenues from smart home consumers. Arguably, retailers can offer managed smart home services at a far lower or no monthly subscription rate by ditching professional monitoring and installation costs. Their business has been built on hardware shipments without those additional costs to its operation or passed on to its customers. Notable success for the new Vivint and Best Buy partnership, combined with the shift from Lowes, may suggest that the U.S. market, at least, is still not ready for a hardware-only approach to managed smart home in retail.