The video surveillance industry has become increasingly commoditized in recent years, which has essentially left manufacturers scrambling to find ways to differentiate their products in what is a crowded marketplace. However, with the competition that is taking place amongst vendors at the higher end of the market with the proliferation of products like multi-sensor panoramic cameras and 4K cameras, some companies have all but abandoned developing new solutions geared towards dealers and end users in the lower end of the market.
Increasing price competition from Asian-based companies (primarily China) has been one of the most commonly offered reasons as to why manufacturers are ceding ground in this market segment. With this “race to the bottom” on prices, companies have seen their profit margins erode which has subsequently allowed some these once lesser known players to gain a foothold in the industry. But the unwillingness from some vendors to push back now may be to their detriment in the long run.
In one of its 10 predictions for the video surveillance industry in 2015, IHS earlier this year said that China would emerge as a leading region for product development with European and North American research and development (R&D) centers taking a back seat when it comes to driving the market. In fact, IHS reported that some leading Chinese companies now have the world’s largest teams devoted to video surveillance R&D. “With complete product portfolios and cost-competitive-qualified products, more Chinese suppliers are also seeking opportunities in the global landscape, gaining share in non-domestic markets,” IHS said in a statement.
While some companies have opted to focus their efforts elsewhere in the market, one company that is standing firm in delivering competitively priced solutions to the low- to mid-market is Samsung. Last month at ISC West, the company rolled out its new line of IP Surveillance Kits which are available in four different bundled configurations. Not only can these kits compete on price, but they also provide the convenience, performance and user intuitiveness that is critical for small- and mid-sized businesses (SMBs) to deploy.
According to Tom Cook, vice president of sales for Samsung, there are two reasons that some companies don’t want to compete in this segment of the market; either they can’t do it or they don’t want to do it.
“I think they are focusing on what they can be successful at, which is maybe a higher end product line or maybe some innovation at a project-based area and that’s where they are going to stay focused because you’re not going to come out with a full product line to cover all bases,” said Cook. “Our direction from (headquarters) is to be number one in this market and you can’t do that by having a niche product or a certain segment of the product line. You need everything. If you look at the triangle of business, the large portion of business is going to be at that low-end dealer who has gone to (one of the major distributors) to buy a product - they are probably buying analog products still and maybe some IP – but they are buying it on price and they are buying it on ease of use.”
One of the advantages that Cook said Samsung has is the ability to develop their own chipsets, which enables them to make a lower end product at a profit versus a company that has to use parts from other manufactures in their hardware.
“Our material and design costs are as low as or lower than anyone else because we’re starting from chips and working or way to finished goods whereas a lot of these companies are buying components, developing product and they are trying to come out a certain price point,” Cook added. “When you come out with a price point product, when you’re doing that process, you have to evaluate quality and price, so they are giving up some quality to get the price point.”
When looking at the history of the market, Cook said that firms shouldn’t be surprised by the gains that lower cost manufacturers have been able to make in the industry, especially considering the market share they were able to quickly obtain in Europe just several years ago.
“The Asian-based companies came in extremely strong – more so on the analog side, some on IP – and basically grabbed total market shares in those product lines,” he said. “Samsung, quite honestly, was hurt in Europe because of the infiltration of this low-end product line that came in from companies in the Asian basin.”
As a result, Samsung went into development on its WiseNet III chipset knowing that they could use it to go after this market in the Americas. Price point aside, Cook said that it’s paramount that solutions designed for this market segment are user friendly when it comes to both installation and operation.
“I’ve always said in many security speeches, the difference between analog and digital is the dealer or integrator installs an analog cable into a DVR, plugs in a camera and the video comes up on the screen. When he plugs an IP camera into an NVR, nothing happens. The screen is black until he goes in with his PC and he programs the IP address to the MAC address and things like that and they just say, ‘Oh, that’s way too difficult,’” explained Cook. “Now it is plug-and-play and they physically plug it in just like analog, except it is a Cat5 cable instead of a coax cable, and the video pops up automatically. That small change has made it so attractive to that dealer to now know he can send out his technicians just like he would with an analog system and know there shouldn’t be any extra labor in setting up an IP system versus an analog system.”
