Narrative: Wearables Are Struggling

Updated: July 8, 2017

Note: this narrative was the subject of the Weekly Narrative Video for July 3-7, 2017. You can see the video on YouTube here, and it’s also embedded at the bottom of this essay.

The wearables market was a hot one for several years, with lots of industry observers and players talking up the enormous potential. But for now we seem to have stalled at a point far short of those lofty goals. In reality, we now have several distinct wearables markets:

  • dedicated fitness trackers largely between $80 and $200, a category dominated by Fitbit
  • dedicated fitness trackers at much lower price points, dominated by Chinese vendors
  • smartwatches, a category currently dominated by Apple, with Samsung the only major other player, and Android Wear becoming increasingly irrelevant
  • GPS-centric smartwatches, where players like Garmin and other specialists have carved out something of a niche, albeit much smaller than the broader smartwatch market which Apple dominates.

At this point, it’s clear that the wearables market is smaller and more specialized than once thought, though it won’t necessarily remain stuck there. Apple has refocused its efforts around the Watch with a health and fitness strategy, but there’s still potential for apps on the Watch to become more meaningful in future.

The news that Jawbone was entering liquidation, which emerged in July 2017, resurrected lots of discussion about the state of the wearables market and the implications for other players in the market, including Fitbit, Apple, and others. The reality is that there is no single unitary wearables market, and each of the segments identified above has its own dynamics and future prospects.

There clearly are some issues with a limited total addressable market and a high abandonment rate, which Fitbit is clearly bumping up against. And the market as a whole continues to be very fitness-focused, which means it won’t be nearly as broad a market as some other more mainstream technologies, at least in the short run.