Fitbit's struggles show that the wearables market is stagnant

January 31, 2017

Fitbit's struggles show that the wearables market is stagnant

Fitbit growth

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The market for fitness wearables remains stagnant and shows few signs of picking up soon, as Fitbit announced that it will lay off employees, USA Today reports.

The company gave the news as part of its preliminary earnings announcement, which reported lower-than-expected holiday sales and shipments. These struggles shed light on the state of the overall wearables market, which continues to show slow growth and stagnation, and may continue to face challenges.

This could just be a temporary struggle for the company as it tries to move away from its traditional core products. Late last year, Fitbit bought the software assets of smartwatch startup Pebble in an effort to diversify its offerings and hedge against a potential drop in the wearables market. The layoffs could be part of an adjustment period as the company pivots toward developing and integrating smartwatches into its larger offerings.

But the company’s struggles indicate that the overall wearables market is not growing either. Fitbit has shipped more devices in the past few quarters than competitors Garmin and Xiaomi; as the market leader, Fitbit's challenges could bode ill for its competitors as well. Meanwhile, these companies will face even further obstacles moving forward as smartwatches become more powerful, less expensive, and more stylish, leading some consumers to opt to purchase a smartwatch rather than a fitness tracker.

When they first broke onto the scene, smartwatches were touted as the next generation of devices set to transform consumers’ lives. And brands, service providers, and the healthcare segment were ready to capitalize on their “always on” nature, which promised to provide greater insight into consumer habits. But while the market initially grew rapidly, it has begun to cool off, as consumers become impatient with the technology's lack of distinct capabilities, such as LTE connectivity and device-specific apps.

In the next few years, the smartwatch market will likely see the addition of new functionality and increased capabilities, which will see the device shipments grow at an annualized rate of 18% through 2021 to reach 70 million units.

However, smartwatches are reliant on a number of factors in order to generate any sort of meaningful consumer demand. Until such a time, adoption of smartwatches will likely be sluggish, as consumers wait for vendors to produce products that can run independently from their phones and provide more useful functions.
So what does this mean for the device championed as the replacement for the smartphone? Should vendors manage to implement a lower price point, better functionality, and expanded use cases, there is a vast potential for accelerated global growth. Moreover, because of the low adoption rate thus far, there is still ample opportunity for new entrants to join the market, and capture mind share.

Laurie Beaver, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on smartwatches that examines all areas of the smartwatch market, including a five-year forecast, key growth trends, market leaders, consumer demand, and more. It also discusses the need for the inclusion of standalone capabilities in smartwatches, as well as the importance of bringing both better apps to the devices and greater consumer awareness of capabilities. Lastly, it explores the nascent smartwatch app market, including its shortcomings and how it can be improved.

Here are some of the key takeaways from the report:

Demand for smartwatches has cooled as consumers wait for better functionality. But early demand suggests the market could take off when functionality improves.
Apple will continue to drive a large portion of the overall market, however, Android Wear devices will quickly catch up as emerging markets begin to adopt the technology.
Health and fitness remain a dominant segment of the smartwatch market, providing healthcare workers and hospitals with savings opportunities. As technology and app development advances, the benefits of smartwatches within these segments will become even more robust.
The future of the smartwatch market remains somewhat unclear, however, there is profound opportunity for businesses and developers to begin exploring the nascent smartwatch market. This will give them a head start against competitors.

In full, the report:

Forecasts smartwatch shipments through 2021 for both overall device shipments as well as by operating system.
Provides an overview of the main players in both hardware and software, and how they will size up in the future.
Demonstrates the effect of Apple’s entrance into the market, and why it's unlikely to dictate future growth.
Gives insight into what technologies need to be worked on in order to incentivize future growth, the effects they will have on the market, and how they can be used.
And much more.

Interested in getting the full report? Here are several ways to access it:

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