Wearables: survival of the fittest

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The wearables market is forecast to be worth $25 billion by the end of next year, but while the outlook is prosperous, there are hurdles to overcome to ensure it reaches its potential

The rise in wearables shows no signs of slowing with huge revenue opportunities, particularly here in the UK.

Last year alone, Brits spent more than £51 million on various wearable devices, ranging from smartwatches to fitness bands. In volume terms,that accounted for more than three million units – double that of 2014.

On a global basis, the numbers are all the more impressive. According to CCS Insight, the value of the market is set to rocket from $12 billion last year, to a staggering $25 billion by 2017. That’s an estimated 322 million units sold.

“The current crop of smart wearable devices is starting to get very interesting,” said Exertis smart technology business manager Rod Slater during Mobile News’ recent wearable event.

“New capabilities open up new markets and channels, and the more compelling the functionality, the more customers will purchase them for their convenience.”

Kantar Consumer Insight consumer director Imran Choudhury added: “The market is still in its infancy and wearables were originally seen as niche products for the tech savvy individual. However, with the developments in VR and smartwatches, alongside more manufacturers entering the market, wearables are only going to get better and we’ll see some significant improvements over the next 18 months.”

Seizing the opportunity

While optimism is high,there is still much to do to ensure the market fulfils its expectation and becomes a mass market segment. With more than 1.4 billion smartphones sold last year, the surface has barely been scratched.

Unsurprisingly, the market is now awash with manufacturers each fighting for a slice of the wearable pie. These include all the usual suspects: Samsung, Apple, Microsoft, LG, Huawei, Sony, Motorola and HTC, but also brands, such as Fitbit, Jawbone, Garmin,TomTom and Jabra.

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But while sales are solid, concerns remain over sustained usage, with CCS research last year showing 26 per cent of owners forget to wear their device, while 16 per cent said they were bored with it.

This is a crucial obstacle to overcome if wearables are to prosper and avoid becoming a short term novelty before being placed indefinitely in a drawer or gathering dust on a shelf.

A quick glance around Mobile News towers, which includes a mixture of geeks, gym goers and marathon runners, reveals not a single person wearing either a smartwatch or band – although most confess to owning one.

And here lies one of the biggest issues facing our panel of industry experts. Manufacturers cannot benefit fully from this booming market by solely focusing on health and fitness.

“Users haven’t grasped the full benefits of owning a wearable beyond fitness,” Gartner research director Roberta Cozza tells Mobile News. “There are lots of health and fitness apps for both Android and Apple devices, but there isn’t much to incentivise someone to purchase one if they’re not into exercise.”

She continues: “We’re still at a stage where wearables don’t feel that necessary to a mass market. Consumers don’t see much value and some of the expensive prices are off-putting. If you leave your smartwatch at home by mistake, there’s nothing much to make you go back and pick it up.”

Appeal

Jabra senior vice president of marketing Calum MacDougall agreed, admitting it’s vital manufacturers must come up with products which prove to be more than just “passing fads.”

Jabra, historically specialists in handsfree audio products and entered the wearables space in 2014. It has so far launched three headphone products, including Pulse which monitors heart rate from a sensor in your ear, Coach, which acts as a personal trainer via an app providing route details and live performance information , and finally its entry level headset, Pace which again via app and records your workouts.

“The challenge with wearables are that most people are using them infrequently. It is a developing market, but a lot of users have a wearable for about a month and don’t see the benefit beyond that.

“It’s a challenge for us and other manufacturers to make sure we provide solutions that aren’t just passing fads, but also deliver real value.”

He added: “Our Pulse, Coach and Pace headsets has been very successful for us. We are driving strong revenues and it’s an important part of the business for us. It’s important for us to move away from our tradition of Bluetooth products to a new category of hearables. They’re an important driver of our revenue and it’s an important part of our strategy.”

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Apple example

So how can manufacturers fully exploit the market? Analysts claim one method involves following the same path as Apple, which had considerable success in the smartwatch sector (launching in April 2015) – accounting for around $1 billion last year. Apple doesn’t reveal sales numbers for this category but is estimated to be as many as 21 million in the first 12 months.

According to IDC, Apple led the worldwide smartwatch market with a 49.4 per cent market share last year. It shipped 14 million units and this is expected to grow to 31 million by 2020. In comparison,Android last year held 21.4 per cent market share, plus another 3.6 per cent for Android Wear. RTOS (5 per cent), Tizen (11.3 per cent) and Pebble (7 per cent) make up the remainder.

Apple’s success has been heavily credited to its approach in ensuring customers understand the benefits of its devices. Apple has been active demonstrating the benefits of the Apple Watch (such as Apple Pay) in its retail stores and in simple “plain English” terms.

“Apple wasn’t the first to launch a smartwatch, but they were the first to have retail stores giving the Apple Watch a lot of space to show them off,” says Choudhary.

Hand-on experience

“Advertising and marketing is important, but when you’re trying to convince someone, it’s important to give them a hands-on demo. They’re definitely head and shoulders above rivals in that aspect. Successful companies actively let consumers know how wearables can enhance people’s lives rather than just give them information”

Garmin UK fitness and wellness product manager Shane Harman agrees with Choudhary that its critical customers understand the benefits and how the devices can become a part of their every day lives. “Once you’ve analysed yourself for a month you understand what is happening and you might give up,” he said.“They need to actively be told about the wider benefits of a wearable product.

“Whether it’s texting from a smartwatch or eliminating the need to carry a wallet, customers need the desire to turn back and pick up their wearables if they go out and forget it. Wearables now are just an extension and they need to become more independent before they can truly become a mass market product.”

According to research from business consultancy Endeavour Partners, a third of 6,223 adults surveyed in April last year stopped using a wearable product within six months because they saw no features that would benefit them in the long term.

“Unlike a headset,which you’re not going to wear for the entire day,the most dominant wearables will be wristbands,” said Wood. “It’s the most accepted place for technology because you can easily get notifications, use them for fitness and make contactless payments. It’s a logical place. Everyone’s getting excited about them and you’ll eventually get to the point where there will be something similar on rings, watches and jewellery.”

Payments

An area most agree will provide major stepping stone to improving the widespread appeal and increasing the longevity of wearables is the contactless payments space. According to the UK Cards Association, more than £1 million was spent in February this year with contactless payments alone – a total of 159 million separate contactless transactions. More than 330,000 contactless terminals are available in stores and restaurants across the UK.

More than £2.5 billion in contactless transactions were made in the first half of last year – eclipsing the £2.32 billion spent in 2014.

Canalys senior analyst Tim Coulling claims mobile payment features will make wearables more valuable to users.

“It’s a case of making consumers aware of the value these services add to their lives and mobile payment is certainly one of them. Wearables for a large part will always compete with smartphones, which everyone has. The true development will be when you’re able to leave your device at home and pay for services without having to use your smartphone or bank cards.”

CCS Insight chief of research Ben Wood, who has vast experience in monitoring and speaking about the wearables market and testing products agrees – adding that features and ease of use are vital for long term usage.

Fashion

Fashion and design will also play a major part in increasing awareness and the popularity of smart wearables in the long run. According to previous research from Kantar in 2014, more than half of 6.7 million adults who were using wearables in the UK considered fashion as a major driver in their decision to purchase a wearable.

The design of wearables have changed significantly, with many manufacturers now seemingly moving away from futuristic looking models, to more premium, traditional models. Huawei and Motorola (360) are arguably the biggest drivers of this, while still maintaining features you would expect.

A number of manufacturers have teamed up with well-known fashion labels for their wearables products also to boost awareness. For example, the Apple Watch has optional straps designed by 50m Paris fashion label Hermes, while smartwatch labels such as Fossil and TAG Heuer have gotten involved in the smartwatch market and wearables have become devices that act as a status symbol.

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Garmin’s Harman claims part of its appeal has been down to the design of its products, particularly its Vivoactive wearables range, one of the company’s most popular products.

He says: “Historically we haven’t made the prettiest looking wearables and we vowed we would never make a bad looking watch again. We’re just trying to make them look as simple as possible. They have to look discreet, have accessories and have exchangeable straps. That’s important when you’re wearing a tracker.”

Kantar’s Choudhary adds: “Fashion is something we have to consider. Bands are seen as more of a jewellery item than a time piece.You have to cater to the consumer with something that looks appealing. A smartwatch means they have to switch from their traditional watch,where design is the most important aspect.”

Virtual Reality

Another major hotspot for the wearables market includes the virtual reality sector. IDC predicts there will be 9.6 million VR products worth $2.3 billion shipped this year, a figure set to rocket to 110 million shipments by 2020.

A number of manufacturers have now added their name to list of early of early adopters, including Sony’s PlayStation VR (gaming only), Samsung’s Gear VR and HTC with its Vive. Users (exc HTC) attach their smartphones to the device to provide a 360-degree view of your surroundings.

For example, one of the demonstrations we were given included riding a rollercoaster, enabling us to look over the edge of the track and turn around to see people on the seat behind.

However, while consumer has been the main focus of VR to date, the opportunities in B2B are expected to be high. Mobile News was given a demonstration by Brightstar, allowing us to walk around its Miami warehouse.

The service is expected to be rolled out to help boost staff training, conference calling and exploring new products in any part of the world from the comfort of your own office.

“Virtual reality certainly opens up many options for the B2B market,” comments Coulling. “Video conferencing within VR will offer a more engaging experience in terms of collaborations. You can also look around products in 3D or examine prototype products like cars or houses before they’re actually built. Someone can get a real feel for these products.”

Wood agreed: “VR will open up more opportunities for sectors like architecture or insurance. We’re still in the early days, but it will allow people to walk through houses and preview them, or take a snapshot of a building site and see how they’re progressing.”

In the future

Many experts and organisations also see huge opportunities for the wearable technology within the health sector.Nokia recently acquired health wearables manufacturer Withings for €170 million (£131.7 million) claiming the purchase would open it up to a larger audience. Elsewhere, Microsoft has currently set its sights on developing a wearable device that can measure “VO2 max”, the maximum amount of oxygen an athlete can use while exercising.

The NHS also believes wearables will play a crucial role in its future. It announced in June last year that it was considering a £22 billion fund in upgrading and improving the efficiencies of its technological services. Part of this funding involves introducing connected wristbands to measure the conditions of diabetic patients by analysing their blood. The NHS claims the technology can be used to reduce the risk of hypoglycaemic episodes earlier. Sufferers experience hunger, nervousness, dizziness and confusion when their blood sugar levels are lower than usual. Wearables connected to a doctor’s smart device would alert them to the increasing likelihood of such attacks.

Wood agreed that IoT wearables would provide a massive benefit to organisations like the NHS, particularly with the diagnosis of patients. He said: “IoT will put the focus back into B2B sectors. Health is the biggest area, especially for hospitals. Doctors can get the vitals from patients and you can get important information on diabetics and whether they’ve taken their medication, or alerts on whether an elderly patient has had an accident.”

Choudhary agrees: “There will be increased opportunities coming from the health side of wearables. Not only will you be able to monitor heart rate, but you can give health professionals access to a whole host of data that will allow them to make sense of their patients’ conditions.”

MacDougall adds: “You’ll probably see a future where you can use wearables to monitor health in both consumer and corporate sector. “We’re right at the beginning of this. You need to think of wearables as more than a second screen and fitness tracker. These are devices that will improve or help people make better choices about their wellbeing and health.”

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