Smarthome Direct Growth the Smart Way
Kapur openly calls it "The Sharper Image model," referring to the growing number of Sharper Image store and catalog products branded with the private label Sharper Image Design logo.
Brand New Solutions
While third-party products based on the popular X-10 protocol (the language that allows home automation products to talk to each other) provided the basis for Smarthome's early success, the company's customers began to request products that were more reliable. Knowing it couldn't control a product's reliability without manufacturing it, Smarthome began to acquire several small engineering firms beginning in 1997.
At first, Kapur notes, the company focused on supplementing its existing product line, developing and manufacturing items that supported the existing X-10 home automation protocol or made X-10-based products better. For example, since the X-10 protocol uses household wiring to communicate between devices, Smarthome developed products to boost X-10 signal strength. But as the Smarthome customer base shifted from automation hobbyists to home improvement do-it-yourself (DIY) types, customers became frustrated with the unreliability of X-10. Most of the time it would work, but sometimes it wouldn't.
For instance, because DIY customers wanted to walk into a room, flip a switch and be sure of the outcome, Smarthome gave its engineers a new task. Rather than simply making X-10 products better, Smarthome wanted to create a more reliable protocol.
So in 2004, Smarthome unveiled INSTEON, a proprietary technology it hopes will become more widely used in home automation products. Much like its earlier efforts to encourage customer feedback on X-10 products, customer requests dictated the new INSTEON products, which also resulted in an improved product line.
Clement notes that this strategy not only has resulted in better margins, but it gives other catalogers the opportunity to show that they understand customers' needs better than general merchants. "In that sense," he says, "being able to develop your own product is a pretty powerful way of expressing your brand."
