IDC just released its third-quarter market share results for wearables, and it was not pretty.
A version of this essay was originally published at Tech.pinions, a website dedicated to informed opinions, insight and perspective on the tech industry.
On Monday, IDC released its third-quarter market share update for wearables, and it was not pretty. While overall shipments grew marginally year on year, reaching 23 million, 85 percent of sales remained in the more aggressively priced fitness bands. The third-quarter results need to account for the launch date of Apple Watch Series 2 late in the quarter.
Small as it might be, Apple is still dominating the smartwatch market, and I don’t see this changing anytime soon. In an email to Reuters, Tim Cook attempted to set the record straight:
“Sales growth is off the charts. In fact, during the first week of holiday shopping, our sell-through of Apple Watch was greater than any week in the product’s history. And as we expected, we’re on track for the best quarter ever for Apple Watch.”
The smartwatch market shares many similarities with the early tablet market
When looking at the wearables market, it’s hard not to draw a comparison to the early stages of the tablet market. As a quick reminder, after the launch of the iPad and an initial influx of tablets that tried to compete with it, Android manufacturers relegated themselves to the lower part of the market. Here, consumers were happy to spend money for a more limited experience, more in common with a media player than a PC. As several Chinese players entered the space, tier one players defected, leaving Apple to control the most valuable part of the market.
The longevity of the tablet category seems to depend on tablets establishing themselves as PCs, thus coming full circle from the very device they wanted to differentiate themselves from. Right off the bat, tablets replicated our smartphone experience, giving us the apps we know and love, optimized for a larger screen, larger batteries and more powerful processors.
As smartphones grew in both size and power, there was little differentiation left to be delivered. Failing to find their place between the smartphone and the PC, tablets had to try and replace one of these devices, and as no consumer in their right mind would give up their smartphone, the PC became the obvious target. Vendors are soldiering on in this space either by making devices look like a tablet and masquerading as 2-in-1s or trying to position them as the next computing platform.
Smartwatches have no point of reference
Wearables, like tablets, are struggling to become a must-have for consumers. As it was for tablets, the market is polarizing toward the lower end, where fitness bands offer a limited focus, simpler value proposition and, most importantly, more affordable price points.
The route to success for vendors will have to be very different, as smartwatches will not benefit from going full circle to either of the products they sprung from in analog watches and smartphones.
Tablets had a much easier starting point than wearables. Replicating what smartphones could do was relatively simple, and although many consumers remain to be convinced, the value proposition was clear.
For wearables, it was much harder. Early fitness bands have not become a mass-market gadget, which makes understanding how a very personal device like a smartwatch could appeal to a very diverse group of people quite difficult. The combination of always-on and a small screen requires information to be displayed uniquely, both in layout and prioritization. This calls for user interfaces and applications to be rethought. Apple, which generally does not enter a market that’s still in its infancy, understood there was a need to learn directly from users with real-life experience. The improvements to Apple Watch UI, as well as the refocus around health, are direct learnings from that first market seeding.
With an improved GPU on Apple Watch series 2 and series 1, we are also seeing new dedicated apps better catering to the use case, rather than being a replica of the phone app.
Personal means finding different hooks
Fitness and health in the wider sense will offer little opportunity to devices in the high end. This is because, for most consumers, fitness and health translates to simple measures such as steps and calories, and these can be delivered by devices that cost a fraction of what smartwatches cost.
Adding value to these categories requires some degree of evangelizing by vendors. Apple has gone quickly down this path by showing active calories, a comprehensive list of workouts, stands and, more recently, breathing. Gamification of health and fitness will appeal to some users, while ties into online coaching services or health insurance rewards might add value for others. Creating an ecosystem that adds value — and has the user think such value comes from the device they are wearing — is key.
However, the difficulty of wearables is the very personal nature of the device. Not all users find the same value from the same features. With smartphones, it was easy. No matter what apps we had on them, we all did one thing: Make calls. Outside of health and fitness, there are other areas where I see an opportunity to hook consumers with wearables:
Payments: Much more convenient than taking your phone out of your pocket.
Authentication: Today, it might be unlocking your Mac or your phone. Tomorrow, it could be your home or any of the smart devices in your home or office.
Decluttering inbound information: If used properly, a smartwatch can help you declutter your information flow by letting you see only what matters to you when it matters to you. Setting up what social media, emails, text messages get to you allows you to stay more in control without getting overwhelmed by being connected anywhere anytime.
Reclaiming your time: By allowing you to see what matters, smartwatches also help you decide what needs attention straightaway or can be deferred. Admit it — when you see a text or an email, often it does not require you to act on it immediately. If you just read messages on your phone, you feel compelled to reply, and once you are on your phone, you might as well check Twitter or Facebook or read that other email that arrived earlier.
Most of the examples I outlined here speak more to a user who is technologically very engaged than a mainstream user. This is not the same as an early adopter who often also has a larger disposable income. Technologically engaged users who have multiple devices, are engaged with apps and spend most of their time connected will see the appeal of smartwatches when properly positioned, but might not see the value at the top of the price range. Apple’s move to update the GPU in the Apple Watch Series 1 while selling it at a lower price speaks to this point exactly.
Where does this leave Android Wear?
Frankly, this leaves Android Wear with a lot of work to be done. It seems to me that not much was learned from the tablet market, poor dedicated app ecosystem, lack of software differentiation and market guidance for the vendors. The slow software update cycle, as well as the limited improvements, clearly point to a Google that has bigger fish to fry at the moment, and it is unwilling to invest in a market that has yet to prove itself. Or — and I hope this is more the case — to an Android Wear team that is regrouping to figure out how to deliver true value.
Wearables could turn out to be important assets in both the connected home and AI battles. So, while hardware might never give vendors the sales volumes they were hoping for, it might give them yet another access point to highly valuable users which, in the long run, will prove an incredible investment. Apple knows this and continues to invest in the space. Sales results from Watch Series 2 might convince others there is more to wearables than a race to the bottom.
Carolina Milanesi is a principal analyst at Creative Strategies Inc. She focuses on consumer tech across the board; from hardware to services she analyzes today to help predict and shape tomorrow. In her prior role as chief of research at Kantar Worldpanel ComTech, Milanesi drove thought leadership research; before that, she spent 14 years at Gartner, most recently as VP of consumer devices research and agenda manager. Reach her at @caro_milanesi.
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Author: Carolina Milanesi
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