Instantly a bell should go off in your head – Garmin is GPS – a worldwide leader in global positioning systems (GPS). Garmin and GPS have been synonymous for years.
The question we now have is: is that still enough for the company?
Smartphones and tablets of today offer built-in GPS functionality with a simple touch of your finger, eliminating the need for a separate GPS unit and taking Garmin’s market share right along with it.
So, it might surprise you when I say that shares of company stock are actually up more than 25 percent in the last two years. Makes you wonder, doesn’t it?
The threat of the smartphone is delivering big blows to Garmin’s automotive/mobile segment of business which generated 55 percent of the company’s net sales in 2012, according to The Motley Fool, and more than one-third of its operating income.
But automotive navigation systems aren’t the only device that Garmin sells, just its most popular…or least popular, depending on how you look at it. Garmin also markets products to outdoorsmen with precision units to help navigate. And then there are GPS units for boats and planes.
Its automotive business is kept afloat with major manufacturer deals that include Chrysler and Mercedes-Benz. The rebound in the U.S. auto market has also helped.
Though Garmin seems to be weathering standalone satnav market retraction, they know that their primary business platform is in real jeopardy. What they’re doing about it may surprise you. The company now has plans to focus on the “wearables” market and break into the health and fitness field.
Getting Fit
It’s the latest craze if you’re a fitness nut. I’m sure you’ve seen or at least heard of the fitness wrist bands that track your every move, using technology to keep you motivated to reach your fitness goals. Nike (NYSE: NKE), Jawbone, and Fitbit have found success already.
If you visit the Garmin website you notice that sports and adventure have definitely taken a front seat to Garmin’s traditional GPS unit. With its Forerunner: a wrist watch for runners with built in coaching features, and an overall segment that Garmin defines as fitness, Garmin is proving that they can contend with the likes of Nike. This category accounted for 12 percent of the company’s revenue in 2012 and about one-sixth of its operating income. It will be even higher once 2013 is revealed.
Garmin’s next focal point will be with what it is calling the Vivofit fitness band.
The name itself already reminds me of other models like the Nike+ Fuelband and the Fitbit Force. Like these others, it’s a wrist-worn fitness tracker that logs the number of steps a person takes and monitors overall activity levels.
The Vivofit also has some new features that are supposed to make the product stand out. For one, the Vivofit can learn your activity levels. From day one, it tracks your movements and will automatically set you up with daily goals based on the amount of activity you have already displayed. This is where you can push yourself to move more and set new goals and milestones.
One feature I think is quite nifty is the meter bar that is incorporated. For instance, if you’re sitting down for an extended period of time, the meter bar will display your inactivity and be in the red position. If you get up and start moving, you can get out of the red and into the green.
For even more Vivofit features, it can be paired with a heart rate monitor for more accurate calorie burning readings, and of course, a heart rate recording.
What makes it more user-friendly is that you can log into the Garmin Connect community website and find other users who have the Vivofit. From there, you can see how you stack up against the competition – physical activity, sleep history, etc. – it is all there for comparison. And if you’re feeling like pushing even harder, you can invite others to compete against you. One simple push of a button and you’re synced up to your online profile.
Competition
As promising as the Vivofit might be, Garmin is going up against Nike, the most popular brand name in sports. By the same token, Garmin has been praised for offering a more functional and superior product. Unfortunately, Garmin’s expansion into the health and fitness market hasn’t received much publicity.
But the product is strong, even if it is an uphill battle against the likes of Nike, who look like they will have a foot in this market for the long haul.
Nike has a complete division – Nike Digital Sport – that focuses solely on wearable products and innovation. And they have rolled out an app ecosystem just for its budding tech platform. And earlier this year, Nike announced that they will be investing heavily in start-up companies to help build their tech empire.
As if Nike wasn’t a big enough threat, it looks like Apple (NASDAQ: AAPL) and LG (NYSE: LG) are working on smartwatches that will rival Garmin’s Forerunner.
The Investment
So “uphill battle” might be a bit of an understatement, but Garmin is committed. They have shown experience and success in the wearables marketplace, and this aspect of health and fitness is growing exponentially in popularity, and still, with no clear-cut winner in the field.
Garmin will launch its Vivofit sometime in the year’s first quarter and will retail for $129.99, or $169.99 with the heart rate monitor.
A lot of us may have expected Garmin to roll over by now and fade away once the smartphone moved in, but the company has proved resilient.
Naturally, I’m still pessimistic about what the company can do in the long-haul up against some real heavy hitters, but there’s no quit in their game. At least for now, the company remains optimistic and ready to take on whoever may rival their success.
