Watch Out: Smartwatches May Go Mainstream This Holiday Season
Are we finally in the age of the smartwatch? Maybe later this year.
NPD's Weekly Tracking Service estimates that close to half a million smartwatches were sold between October 2013 and June of this year, accounting for $96 million in revenue. That might seem like a lot, but compared to the $330 million digital fitness market, the category still has a long way to go.
"It seems like we're on the edge of version 2.0 with smartwatches," Ben Arnold, an industry analyst for the NPD Group, tells us. "We've got all these new announcements from Samsung, and the Android Wear watches from LG and Motorola, and I feel like this new generation of smartwatches is making the device actually smart."
A category that got its start a few years ago with the launch of Pebble on Kickstarter, smartwatches are finally starting to come into their own. "I think we'll really start to see adoption in ramp up around the holidays," says Arnold.
Beyond the early adopters: It's all about software
What the smartwatch needs to get to the next level might live in its software. What's holding the category back is the types of applications that are available for watches, Arnold says.
"I feel like the applications that are making smartwatches interesting at this point are still kind of things that [only] tech-savvy and early adopters know about," he says. Applications like Google Now can be exceptionally powerful for those who know how to use them, but the general public still might not be aware they exist.
In order for smartwatches and wearables in general to reach that next level, mainstream consumers are going to need to be more aware of the applications available for the watches and, more importantly, how those applications are going to improve their lives. Apps like Evernote and Runkeeper are available for smartwatches now -- the challenge is showing people how they can be useful in wrist form.
There's one big player missing from the smartwatch game: Apple. "We all pretty much expect Apple to come out with the "iWatch' as we're all kind of calling it," Arnold says. "I think when that happens it changes the game."
If and when Apple puts out a smartwatch, Arnold says that it should make Apple loyalists take notice of the category -- a move that will help the category transition from the tech-savvy early adopter crowd into the general consumer market.
Samsung and Pebble account for 90 percent of smartwatch sales in the U.S. "If we're looking at levers that can take the smartwatch mainstream, we're probably looking at Apple's entrance into the market as that point," he says.
Another big barrier to entry right now is price. Smartwatch pricing fluctuates between $150 and $300, with the low-end represented by the first-generation Pebble and Gear pricing when paired with a smartphone purchase. Over time, those numbers are expected to decline, especially when more players enter the marketplace.
Much like smartphones, we'll likely start to see inexpensive entry-level devices along with mid-level and premium devices. Arnold and other analysts expect the holiday season this year to be huge for smartwatches, once consumers become more comfortable with the category and more knowledgeable about its benefits.
A design in transition
There's also the matter of design. While NPD estimates that 58 percent of wearable fitness device buyers are women, most smartwatches aren't designed with ladies' wrists in mind. Smartwatches are almost exclusively bulky in design. After trying on some of the latest from LG and Motorola, ReadWrite's Adriana Lee found that watch makers are at least making strides to change.
LG's new G watch was a bit too much for smaller wrists, but Motorola's Moto 360 was comfortable and actually fit. "This is sexy hardware design that might work as a high-tech boyfriend watch, at least," says Lee. And that's a start.
"They will become more fashionable," says Dan Harden, CEO of industrial design firm Whipsaw, the company behind things like the Nike Fuelband and Nod Labs' gesture-controlled ring. The first smartwatches to market have been generic in nature in part because they needed to appeal to a huge audience with their designs, Harden says.
"Future smartwatches will be fashioned by many different likes and dislikes," he says. "They will be aimed at particular individuals. Twenty-five-year-old women are going to want something different than a 55-year old male. There will be a sea of these devices out there."
The industry is just now transitioning from industrial design to fashion design -- a move that will open the door to a ton more options, Harden says.
Wearables beyond the watch
Perhaps smartwatch-makers should take a design cue from fitness trackers. They're designed for all types, and fashion designer Tory Burch even recently put out a special line of trackers with FitBit.
The digital fitness category has grown considerably over the past few years, with devices like the Fitbit and Jawbone UP topping the popularity list. As the smartwatch market grows, those companies will likely have to transition along with it.
"We'll wait and see what Apple does," says Arnold. "By all indications that's going to be a very health- and fitness-focused device. If that happens, and it works really well, that puts a lot of pressure on FitBit, Jawbone -- those guys that are making fitness devices."
While customers might ultimately transition to smartwatches for their basic fitness tracker needs, a new specialized fitness market might emerge for products designed for specific types of workouts. Think more advanced counters for your bike, or devices made specifically for weight lifters. A specialized market is just what companies creating other wearables like smart glass are banking on.
"People are used to watches, but for some applications it's inconvenient," says Dan Eisenhardt, CEO of Recon Instruments. Recon sells a line of smart glasses made specifically for sports. Eisenhardt notes that while people might like smartwatches for everyday use, there will always be situations such where something like smart glass is more appropriate. For instance, when downhill skiing, glasses make a lot more sense.
"[In sports] why wouldn't you want information close to your attention," Eisenhardt asks. He sees smart glasses as a space that evolves into an activity-specific wearable, something that you're putting on when you ski or go for a ride on your mountain bike, but you aren't necessarily sporting to the office every day.
Watch out for a holiday push
If Apple does release a watch this fall, look for all smartwatches to see higher sales as mainstream consumers start to realize their value and add them to holiday wish lists this year. As watch sales grow, more developers will be putting out watch apps, making them all the more useful.
Prepare your wrists: It's almost time.
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