It may be a little premature to declare smartwatches dead as Variety did following reports of a dismal Q3 for the Apple Watch. Industry analysts estimate that shipments for the device were down 71 percent. But, there are other ominous signs Apple is uncharacteristically losing the battle for consumers, as its share of the wearables market has tumbled from 17.5 percent to 4.9 percent. Consumers may yet come around, but those who touted the smartwatch as the next big thing need to look over their shoulder at the oncoming juggernaut, fitness trackers.
One could dismiss the lousy 3rd quarter results as a sign consumers don’t like feeling physically encumbered by yet another high tech device. But, the fact is the overall wearables market grew 3.1 percent year over year in the third quarter of 2016. That’s right. Even as smartwatches languish on store shelves, the sales of other wearables are moving briskly. So what’s going on here? According to the International Data Corporation, (IDC) basic wearables consisting mainly of fitness bands accounted for 85 percent of the market and experienced double-digit growth.
It’s early, but consumers deciding whether to go with a smartwatch or a fitness tracker are opting for the device that actually does less. It’s not just about price point, though the appeal of fitness trackers is due in part to the fact they’re cheaper than smartwatches.
As Jitesh Ubrani, senior research analyst for IDC notes, “it’s still early days, but we’re already seeing a notable shift in the market. Where smartwatches were once expected to take the lead, basic wearables now reign supreme.” Urbani believes simplicity is a key driver of the basic wearables market. Whereas smartwatches try to do a bit of everything, fitness trackers aim to solve one clearly-defined problem.
Thus far, the strategy is working extremely well for companies like market leader, Fitbit. Fitbit’s market penetration in the area of fitness trackers hasn’t escaped the notice of companies like WiLAN, the Canadian patent monetization firm. WiLAN now has a bigger patent footprint in what appears to be the growing consumer market for basic wearables. This after Micro-Optimus Technologies, Inc., a subsidiary of WiLAN, acquired a portfolio of patents from Panasonic Corporation last month. The portfolio covers motion sensing microelectromechanical systems (MEMS), technology used in products like fitness trackers and handsets.
This isn’t the first patent acquisition for WiLAN in the area of wearable technology. Earlier this year, the firm acquired another portfolio of patents from PhysioKinematics LLC, also around technology that tracks the movement of the body.
Not every venture into the fitness tracker market has enjoyed the kind of success that Fitbit has. Microsoft entered the fray with the Band in 2014, only to discontinue the product earlier this year. Some consumers complained the product was plain and uncomfortable. The tech giant has even discontinued the Band software development kit (SDK). With the wearable tech market estimated to generate $34 billion within the next four years, it’s understandable why the Redmond-based company wanted to get into the market. It may be a lucrative market, but profitability is obviously not guaranteed.
So far Fitbit maintains a lock as a market leader, despite lukewarm reaction to its long-term strategy and stock price. Xiaomi has carved out a market on price point for cost-conscious consumers, while Garmin’s focus has won converts among serious fitness aficionados.
Don’t expect smartwatch makers to give up yet. Companies like Apple and Samsung are proven masters at being able to reinvent products in such a way as to reignite consumer interest. The smartphone market is proof of that. But, over the holidays it may serve those tech giants well to ponder the old adage about less being more. In the case of wearables, it’s a philosophy serving the makers of fitness trackers very well so far.