It’s All in the Wrist
We've all heard of the "Internet of Things," the idea of billions of devices that are all connected, automating and directing every facet of our lives — from the small scale to some of the largest industries on Earth.
Our research team witnessed this in full force at the 2016 Consumer Electronics Show in Las Vegas. Among 3,600 exhibitors, we saw virtual reality, 3D printing, robots, drones, and driverless cars. We saw presentations from Samsung, LG, Qualcomm, and other tech giants.
But wearable technology was the star.
It's no surprise, either. Dozens of tech experts and research organizations are estimating that "smart wearables" will generate $28.7 billion in revenue — in 2016 alone. That's an 18.4% increase from 2015.
Wearable technology is a broad umbrella, ranging from sweat analysis tools to pet collar gadgets and, yes, even to smart bras. The market as a whole is expected to grow significantly, with most experts calling 2016 a "transition year" for the technology.
In 2015, 39.5 million U.S. adults 18 and over used wearable devices, including smartwatches and fitness trackers — an increase of 57.7% over 2014. Research firm eMarketer foresees a continuation of this trend throughout 2016 and beyond, with 81.7 million adults using wearables by 2018.
Based on what our research team saw at the CES 2016, the biggest movement within wearable technology is all in the wrist.
It’s probably no surprise to our readers that Fitbit, Inc. (NYSE: FIT) is the frontrunner for this sector. Fitbit is holding the majority of market share for wearable technology, and not even Apple (NASDAQ: AAPL) can take that away from it.
Unfortunately, the major downfall for Fitbit is the “one note” characteristic of its products. The company recently released the Surge, which does have notification and alert capabilities. However, Fitbit remains a pure play in fitness trackers, and that leaves it vulnerable to the impact of competition.
It maintains the majority of market share for now, but we don’t feel confident enough to call this a guarantee for the future.
Then there are other logistical issues, like the fact that more than 50% of Fitbit owners stop using the product within six months. This trend isn’t isolated to Fitbit. According to most statistics, 42% of fitness tracker owners quit the program within six months. This means that the recorded number of Fitbit users may not be accurate, especially when considering continuously active users.
With that, we would like to encourage our readers to think slightly outside the box when it comes to wristwear technology.
You’d be mistaken in believing that wrist technology is reserved solely for tracking fitness and activity. Arriving a little later to the wearables scene are companies like Fossil (NASDAQ: FOSL), with an established reputation in trendy accessories. Now, they are expanding into technology.
If anything, the entry of Fossil, the number one manufacturer of fashion watches, is bringing legitimacy and variety to wearable technology. Although it's one of the newer non-tech companies to enter the space, Fossil's “Q” line of smartwatches means that consumers can expect products that align more with more traditional aesthetics.
Fossil also poses a challenge to existing wearable companies — creating competition to create more aesthetically pleasing products. Let’s be honest — there are many people who just don’t like the look of smartwatches. A majority of those people might be unwilling to sacrifice style and feel for technology. Fossil is bridging this gap, and at prices that are competitive with the rest of the market. Its products range from $125 to $275.
It gets better, though. The provider of Fossil’s electronics? Seasoned tech company Intel (NASDAQ: INTC). This is a promising match, allowing Fossil to compete in the smartwatch market without entering the ground floor of the technology side.
The Consumer Technology Association predicts that 38 million wearables are going to be sold this year, with fitness trackers growing by 12% and smartwatches growing by 22% as compared to 2015. The onus is not merely on tracking data anymore, but also on bringing aesthetic appeal and comfort to the functionalities of wearables.
Fossil is also on the verge of acquiring the innovative wearable tech company Misfit. This is basically a match made in heaven, combining Misfit's technology with Fossil's brand presence and scale.
On its own, Misfit is a company to be reckoned with. Founded by former Apple CEO John Sculley, the company debuted as a wearables startup and has attracted $63 million in funding and raised nearly $850,000 on the crowdfunding site Indiegogo. Most recently, Misfit has entered into the "smart home" sphere, developing wrist accessories that can also be used to lock and unlock doors, adjust thermostats, play music, and adjust home lighting.
At CES, Misfit revealed its most recent product, the Swarovski Shine — a piece of jewelry that also serves as a fitness tracker.
"We fundamentally believe consumers care about both technical functionality and fashionable design. In fact, one without the other is simply not enough. With the acquisition of Misfit, Fossil Group will be positioned to win with the connected consumer," said Greg McKelvey, chief strategy and digital officer of Fossil Group.
McKelvey also states, "Our world-class design and global distribution, combined with Misfit's technology platform, creates a significantly advantaged, multi-brand and global wearable technology business poised to drive the convergence of fashion and technology."
Fossil is expanding its existing wristwear presence into the fitness and technology sectors. It is making smartwear that appeals to the average consumer.
On the flip side, Under Armour (NYSE: UA) is expanding its existing fitness presence into the wristwear and technology sectors, continuing its relevance with the athletic-minded consumer. Baltimore-based Under Armour, which is most famous for its moisture-wicking fabric and activewear, has since become involved in footwear and other accessories.
The acquisition of digital app-maker MapMyFitness in 2013 marked the company’s entry into the technology sector, so it comes as no surprise that CEO Kevin Plank is moving even further towards wristwear — merging his existing specialty with a growing market demand.
"For 20 years, Under Armour has changed the way athletes dress and now we will change the way athletes live," Plank said in a press release. "Combining the world's largest health and fitness community with the game-changing connectivity of UA HealthBox and UA Record, we are taking Connected Fitness to another level. With the HealthBox suite of products being introduced, athletes will be empowered with the information to make better decisions and ultimately enrich their lives in a way that's never been done before."
Under Armour unveiled its “Connected Fitness” series at CES 2016, a movement that many analysts believe is just another step to overtake Nike Inc. (NYSE: NKE). The “UA Health Box” includes a sports band to track sleep and activity data, as well as a heart monitor and Wi-Fi-equipped scale that calculates weight and body fat percentage.
The company also recently released a smart shoe, the UA SpeedForm Gemini 2 RE. The products were developed in partnership with Hewlett Packard (NYSE: HPE) and IBM (NYSE: IBM) and are expected to greatly expand Under Armour's existing retail presence.
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