Ali Durmus Ali Durmus Founding Partner, Executive Committee Member - Etiya

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2015 - The year the wearable market explodes

  • “The worldwide wearable device market recorded its eighth consecutive quarter of steady growth in the first quarter of 2015. Wearable Device Tracker vendors shipped a total of 11.4 million wearables in 1Q15, a 200.0% increase from the 3.8 million wearables shipped in 1Q14.” IDC Worldwide Quarterly Wearable Device Tracker

     

    Ali Durmus Wearables2015 is undoubtedly going to be the year that we see the wearable market explode. It has maintained its upward trajectory for the eighth consecutive quarter according to IDC which excludes the latest Apple Watch offering which launched earlier this year. IDC estimates that 72.1 million devices will be shipped in 2015 up 173.3% from the 26.4 million units shipped in 2014. Fitbit continues to be the market leader with 34.2% market share in 1Q15 with Xiaomi coming second at 24.6%. Fitness, including activities such as how many steps a person has taken in a day along with running, hiking and multi-sport activities continues the dominate the reasons why people are buying wearables.

     

    However long fitness continues to remain the reason behind the boom in wearables is yet to be seen as the new offering from Apple could be about to change all of that. Undoubtedly fitness will always play a key part in wearables but the “cool” factor will no doubt begin to take over and people will start to move to iconic brands such as Apple. We are yet to see any official data from Apple regarding how many Apple Watches have sold since its launch back in April, however, a report last week estimates that the company has sold 2.79 million watches. Not only are Apple benefitting from the sale of its watches but according to data provided to a Reuters report nearly twenty percent of Apple Watch buyers are also buying a spare wrist band (watch strap), which not only adds to Apple’s profits but yet again shows that there is a “cool” and stylistic factor at play.

     

    The Apple Watch is going to change the wearables market, just as it revolutionised music on the go and eroded at the market place which Sony once owned with its Walkman. Wearables such as watches will no longer be just about fitness but will be about communicating on the go with a variety of additional apps added. The convenience of this will be certainly be seen especially as we enter the “phablet” era with phones increasing rather than decreasing in size as consumers increasingly want larger screens on devices. Rumours are already circulating around the successor to the first Apple Watch with a Forbes.com article stating that the second edition of the watch will incorporate a FaceTime camera and tether-less functionality. The question, therefore, needs to be asked – how can companies such as Fitbit maintain their competitive advantage especially as their shares soared on their stock-market debut, jumping more than fifty percent above their initial offering price. The company is now valued at around $4.1 billion.

     

    A simple answer to this maybe price point and keeping with fitness functionality. The Apple Watch won’t appeal to everybody, especially those who are without the corresponding iPhone. Moreover, some people do simply just want a fitness app and wearable, just as people had pedometers in the past. Price erosion has already been quite drastic as Jitesh Ubrani of IDC said. “We now see over 40% of the devices priced under $100, and that’s one reason why the top five vendors have been able to grow their dominance from two thirds of the market in the first quarter of last year to three quarters this quarter”. The other threat to companies such as Fitbit will come from the other smart phone makers such as Samsung who will no doubt add to the sophistication of their wearables and will tie it back to the Android platform. The market is certainly booming and 2015 will see exponential growth but the winners and loser of this dynamic and fast-paced sector is yet to be decided.

     

    There are also some other key considerations and opportunities which need to be looked at with the rise of wearables especially around the use of the data which they provide. As well as location based services the next level of connectivity needs to be considered such as relaying the health data to the wearer’s doctors which may play a major role in preventing serious health conditions, especially such as heart attacks. There have been a number of stories in the past few years where even seemingly very healthy and young sport stars have collapsed of undiagnosed heart conditions on the pitch. The use of wearables in a connected healthcare and lifestyle environment will become of increasing important especially with the management of illnesses as well as for health predictions and the use of calculating things such as health insurance. There are the obvious security and privacy issues that need to be addressed with that.

     

    The wearables industry is currently booming with wrist wearables but there are other products out there or in development such as the connected shoe or bra. Despite these innovations, wrist wearables will continue to dominate for the near future, yet there was an interesting news story this week regarding RFID chips in Sweden. One Swedish company has offered its employees RDIF (radio-frequency identification) chips, about the size of a grain of rice to be planted under the skin. It gives access to doors, photocopiers and in the long-run it will allow users to pay in the café. This development opens up interesting questions around the future of “wearable” devices and if soon, basic connectivity and date could be collected, stored and shared in these tiny RDID chips.

     

    The wearables industry is certainly and exciting one and 2015 is sure to be the year that it explodes. It is a key market to watch, especially for those interested in IOT and the connected lifestyle. Lots of questions still remain over security, privacy and other key areas such as customer experience and data analytics (collection, use and storage). There will be much more to come on this over the year so stay tuned…. The market is evolving, don’t take for granted the concept of what a wearable is today… as it may look very different in the “tomorrow”.

    Ali Durmus
    About Ali Durmus Ali Durmus works as Founding Partner, Executive Committee Member at Etiya
    More information : www.etiya.com/