Costco's Impact On Surveillance?

Like many of you, when I go to local stores and shops, I check out what type of surveillance they are using. I am increasingly noticing a lot of Lorex at small / independent businesses. I have to believe this is coming via the local Costco that features Lorex kits.

When Flir acquired Lorex a few months ago, they disclosed that they sold 500,000+ cameras in 2012. That's quite a lot, especially since it likely came from sales / users deploying an average of a few cameras each.

I am wondering what your experiences are? Are you seeing a lot of uptake of kits from warehouse / super stores like Costco, Sam's Club, etc.?

Funny you should mention this. I just saw Lorex in two locations today. It was the first I'd ever seen it in the wild, so I'd say it's possibly on the upswing.

I have not seen Lorex specifically, but when someone comes to us enquiring about cameras, they usually scoff at the price and reply with something along the lines of "I can get cheaper at Costco." It has especially hampered sales of our recently launched Total Connect video services from Honeywell I am not in sales, this is just what I've heard a round the office) . Though I'm not overly fond of the service, still.

Lets face it, they are a major player in this industry, whether we like it or not.

Daniel, good feedback, thanks for sharing!

Sean, I am curious how major they are, any idea? I don't think they are having much of an impact on the larger business / corporate / municipal markets but it seems a lot of small businesses take whatever Costco has (not just for surveillance but for lots of supplies).

I've always believed that if someone is entertaining buying a DIY kit from Sam's or Costco, it's better to sell them their 2nd system once they figure out how bad it is. If they buy the DIY kit and it works for them, that's great, they are not our target customer.

You better hope then it doesn't work then :) I am actually curious about the satisfaction rate of people who buy kits from Costco. It's hard thing to do though short of sending a survey taker door to door (though maybe we should do that).

I think the bigger risk occurs as Costco's offering advanced. We've talked about this before but the Costco Qsee (4) 720p HD kit for $699 seems super popular and starts to close the quality gap which is the most obvious difference for smaller users who historically bought analog kits.

I think the mere fact that we are talking about them right now indicates they are a major player. Just as a previous poster said, you will get clients all the time asking how their equipment compares to Costco stuff. And for the most part, Costco stuff is a joke and their is no comparison, but nonetheless its something that installers will have to deal with when customers ask. The Qsee kit that you indicate John is actually a pretty good system, especially for that price, I am sure there are exceptions to some of Costco's equipmet and this is one of them. The problem for me as a distributor and any other distributor is when they sell that system at that price, there is no way I can compete with that pricewise. If I would have to guess, they are taking a loss on that system as a loss leader possibly, I dont know. But most of our customers are installers and price is important to them but not the most important. Tech support, customer service, relationships, etc ranks up there with them and this is something that Costco cannot compete with us on.

Dont know how much Costco sells anually but as far as Qsee, they do a ton, literally. Another colleague in this industry noted that they studied their import records before, and estimates they sell 500 DVR's a day. I know Qsee sells through many channels, but I assume a large chunk of that is through Costco. When you are doing that kind of volume, you can make very minimal margins and even take losses on occasional products and not get hurt.

You're absolutely right about hoping it doesn't work out.

The quality of image gap can narrow I guess, but there's still going to be a limited market for DIY surveillance. People hire companies to install systems because of craftsmanship, professional products, turnkey installations, etc.

Sean, can you elaborate on studying import records? Can they be publicly obtained? If so, how?

Undisclosed, sure, no doubt, there's limits. The shift is that, not too long ago, there was not really any surveillance options at local retailers. Now, there's a lot and, to the extent that the quality gets 'good enough' a lot of small businesses will just choose that.

I don't see how Costco kits have any impact on bigger businesses, but for single site / small / family businesses it could dominate.

Agreed. I would be much more nervous if I worked for a company that was a Deal of the Week at ADI. I'm not saying we don't do small businesses, but it's a very small portion of our business.

I remember selling an 8 camera Intellex / AD system for $15,000 to a local restaurant. I am dating myself here (maybe 8 years ago). That's the type of deal that would very likely go to Costco today regardless of how good or inexpensive an integrator could go.

Related, I wonder how this is impacting integrator business on that end of the market. Once upon a time those were decent, every week projects, now?

Like, I Remember those days, When there was value in the profession.

The average number of Bentleys in any geographic region denotes the level of collective capex spend for that locale. The average number of 15 year old Honda Civics can tell another version of that same story.

I would suggest that any 'uptick' in the use of DIY solutions by companies who have historically been integrator customers is just another example of this economic tale.

One thing I will say about the "Costco Survelliance" is that it isn't exactly crap, in my experience. I was doing some work in a guys house on his burglary alarm system and he was talking about this camera system he got from Coscto. If I remember correctly it was a Swann Security system. It was hardwired, and he had a friend run the wires for him, but the picture was quite good in my opinion. Came with an ipod/iphone app that also seemed to work pretty good.

I didn't go into a lot with the system, since that wasn't why I was there, but just from the brief bits I saw, I wouldn't have called it a cheap system, even though he paid like $500 for 4 channel dvr and 4 cameras. That same system actually runs for $399 now I think.

Daniel, to your point about these systems not being crap, we tested Hikvision's lowest cost sub $300 DVR almost 2 years ago and it was quite solid. See our test report of Hikvision low cost DVR, contrasting it to Milestone.

For what its worth, most of the Costcos in the Pacific Northwest uses OEM versions of Geovision systems for their own security needs. They were mostly installed by Focusmicro based just outside Seattle.

John, Manufacturers like Revo, sell their products through big box retailers. If my memory serves me correctly they are available at Sam's Club. Dan Stricklin

And Revo looks to be an OEM? Of Dahua or someone else?

Costco/Sam's Club has zero impact our light commerical/residential camera sales. Once a DIY, always a DIY. I think the bar I go to all time has them. We are hired to design the system and recommend the correct cameras for the end user. They either have limited knowledge on the subject or have the wrong ideas on what can and can't be done. Usually the people who want the image quality of a $1,000 camera can only afford the $100 camera while the person with the budget of the $1,000 camera is happy have tons of $100 cameras. I've only 1 person give us a look before buying the cameras from Sam's Club. I would say a fair amount of the time, the customer have already bought have cameras from Costco and weren't happy with the quality or they broke within 6 months. I can name 10 clients like that off the top of my head. We were hired to design and install a "professional camera system". Granted you don't get $15k for 8 cameras anymore but there are more clients out there want cameras. So if you are good at sales you can more than $15k over more customers and referrals.

I quote a ton of Speco (DVRs) with Bosch Advantage line cameras in this segment of the market but we are starting install a few Axis camera compainion sites. They are even buying the P3364-VEs which is not a cheap camera by any means. So even in this market we starting to install MP IP cameras where even last year it would have been all analog

Slightly off topic, but very related... Does anyone know what cameras/VMS Costco actually uses in their own stores?

I just ran across an interesting article called "Residential Video: Waiting In The Wings".

What is especially interesting about it is, it mentions pretty much everything we've all pointed out above.

That in itself isn't that interesting, I admit..... until you see the October 2008 print date.... :)

What has changed in 5 years?