Residential Security COVID Market Report

May 11, 2020
Despite major headwinds, experts say the virus may not be a death sentence for alarm companies (Security Business magazine cover story, May 2020)
This article originally appeared as the cover story in the May 2020 issue of Security Business magazine. When sharing, don’t forget to mention @SecBusinessMag!

As the COVID-19 crisis rages on, security integrators serving the residential security and smart home markets have had to make major adjustments as their ability to sell and install new systems dwindles.  Luckily, residential and small business-focused alarm companies may be better positioned than many businesses to ride out the storm.

“In comparison to most other companies, alarm companies are in very good shape relative to their RMR – which is a substantial majority of their revenue,” says John Mack, EVP, co-head of investment banking and head of Mergers & Acquisitions for Imperial Capital. “A reduction in new sales and installs, which is generally a net investment activity, may actually help alarm companies conserve cash.

“My guess would be that attrition will likely be very modestly negatively biased, as there are countervailing pressures,” Mack adds. “On the one hand, with financial hardship, people simply won’t be able to pay; on the other hand, security in times of uncertainty like this is more heavily valued, so customers are more likely to want to keep the service, even if it is a financial hardship. The other positive offset to attrition will presumably be a reduced level of customer moves and competitive takeovers.”

There is no doubt that there are obvious headwinds in the residential security space due to COVID-19; however, savvy integrators can hopefully further limit attrition through this rough patch by embracing some changing consumer tendencies. The key is understanding the market pressures experienced by customers and consumers alike. Here's a closer look at the top COVID-19-related threats and opportunities that have affected the residential security space:

Major Threat: Social Distancing

For now, the most obvious implication for regular professional alarm dealers is that their new install volume will likely be down significantly until such time as the social distancing restrictions are substantially eliminated,” Mack says. “This is specifically tied to the fact that most residential customers will not want installers in their homes, and for small commercial customers the same will be true in addition to the fact that many of these businesses will be closed.”

On the sales side, door-to-door sales have essentially been shut down as well due to social distancing; in fact, last month, we reported that ADT had eliminated door-to-door sales internally and encouraged all of its dealers to do the same.

“We don't know (if social distancing) will last a couple more weeks or potentially if it could be extended for a long period of time,” Brad Russell, Research Director for the connected home market for Parks Associates, said on a recent Parks webcast. “It is going to make it increasingly hard for consultative selling to take place – something residential security has thrived on, either through lead generation by door-to-door sales, or putting a technician in a home sitting on the couch, presenting the products and doing direct selling. That whole distribution model and sales model is going to suffer.”

Major Threat: The Economy and Housing Market

Of course, massive unemployment and reduced incomes will lead to a reduced purchasing ability among working populations and retirees. “Products and services considered non-essential will be vulnerable to budget cutting by consumers,” Russell says.

Perhaps just as devastating, however, will be a softening of the home building market. “The housing market has always been a very significant trigger for professional security monitoring services or smart home upgrades,” Russell adds. “Prior to COVID-19, the housing market forecast a million new single-family homes to be completed this year and about 370,000 multi-family homes. As the housing market softens both in the single-family and in the multi-family areas, it could very well threaten pro-installed products and system sales.”

Both Threat and Opportunity: Occupied Residences

The more that people are at home, the more they can enjoy and appreciate smart home automation and technologies, according to Russell. “Similarly, more time at home can enable more home improvement projects, and consumers may see this as a time to invest in their homes to improve long-term value,” he adds.

This obviously creates an opportunity for residential integrators to leverage their interactive services offerings and expand beyond security to smart home technologies. That said, increased time at home may reduce the need for security monitoring – an arguable concept, of course, when consumers have been arming their systems before they go to bed since the beginning of alarm systems. But Russell points out that one of the fundamental aspects of the value proposition for security monitoring is missing: Protecting assets and property when your customer is away from home.

“If you customers are not away, it undercuts the value proposition for monitored security,” Russell says. “The reduced availability of first responders may also undercut the value of professionally monitored security. Certainly, first responders or their time is consumed with urgent needs of responding to COVID-19 related issues, which may cut down response times or even response rates.”

Flying in the face of the occupied residences drawbacks, one need only look at the massive spike in gun sales since the beginning of COVID-19 to understand that family security and safety remains one of the top concerns of residential customers. “There is certainly a generalized anxiety over health, safety and job security, but we could very well see that spill over into physical safety – which is something you can actually buy,” Russell says. “There is some concern that desperate people in and around communities will become a physical and property security threat, which could generate a rise in interest in security.”

Major Opportunity: Healthcare  

For years, residential integrators have been encouraged by experts to add Personal Emergency Response System (PERS) offerings, as well as aging-in-place and remote caregiving tools. COVID-19 has brought those technologies to the forefront, as caregivers now deal with the need to remotely care for parents and other seniors.  

“You can only imagine the implications of seeing your elderly relatives in a care facility where people are getting COVID and dying vs. having a very good PERS and telemedicine solution to protect your elderly relative in their home,” Mack says. “That is a pretty big deal, so that sector is actually doing quite well.”

“These kinds of technologies go hand-in-glove with remote patient monitoring,” Russell adds. “Where security and safety sensors can do activity monitoring of a loved one’s behavior, those could also be used to provide contextual information for more health-related data that would come from remote patient monitoring.”

Additionally, Russell says that voice control may become more valued – simply because it enables less touching of objects. “In the environment we are in right now, we do not want to touch light switches as much, for example,” he says.

Threat and Opportunity: DIY

An outline of threats and opportunities in residential security obviously cannot omit DIY. Mack says that DIY alarm industry vendors are reporting their lead volumes are holding up reasonably well. “They are off, but not off nearly as much as you might expect, and the closing ratios are higher,” he says.

The social distancing that prevents professional consultations and installations could obviously make DIY more attractive; however, it should open an avenue for traditional residential alarm companies to offer a “do-it-with-me” type of service. Even before COVID-19, this trend seemed to be taking hold.

“Studies show that the economy – certainly in the U.S., if not the world – is moving towards a do-it-for-me model vs. do-it-yourself,” Michael Barnes, founding partner of consulting and advisory firm Barnes Associates, said during his ESX session last year. “Everybody is outsourcing everything – laundry, lawn care, landscaping, pest control, Uber…the list just goes on. The whole idea is to make life simple, so I don't have to do a lot of things.”

Kirk MacDowell, founder and president of business consulting firm MacGuard Security Advisors Inc., wrote about ways that residential integrators can adopt a do-it-with-me model in his Security Business April 2020 article, Residential Security Sales in the COVID-19 Age (  

Paul Rothman is Editor-in-Chief of Security Business magazine ( Email him your comments or topic suggestions at [email protected].