This time last year the forecast for wearables was gloomy.
Research firm eMarketer had slashed its 2016 wearables growth outlook from 60 percent to just under 25 percent. The smartwatch market had declined more than 51 percent in the third quarter of 2016, according to market researcher IDC. Wearable maker Pebble sold itself to rival Fitbit, and Jawbone all but disappeared. The general opinion was that wearables were dead.
But the clouds hanging over the market began to clear this year, indicating brighter days ahead. In September, IDC reported shipments of wearable devices would rise 16.6 percent and forecast double-digit growth through 2021.
It turns out the wearables market isn't dying. It's evolving.
"What we're seeing here is a transition from basic to smart," says IDC analyst Ramon Llamas. "That's a reflection of not only what vendors are willing to develop their devices toward, but it's also an indication as to what end user expectations [are] about these devices."
In other words, we want our devices to do more than just tell us how many steps we've taken today. We want them to give us the latest news, turn on our car or ping us with email and social media notifications. As wearables get smarter, they'll get more useful and, potentially, become a crucial part of our lives.
Wearables are maturing from fitness trackers to health monitors that can detect problems such as hypertension and sleep apnea, flag potentially dangerous heart conditions and even alert us we're getting sick before the symptoms show. Greater integration with voice assistants like Alexa, Google Assistant and Siri can help with everyday tasks like setting reminders and timers, making restaurant reservations, sending text messages and querying the internet (like finding the number of ounces in a liter). All this added functionality could make smartwatches more ubiquitous -- something we'll actually keep wearing instead of abandoning after a few months.
"I think we're at an interesting turning point where there are more smart devices coming out and grabbing attention than we'll see from their basic wearable counterparts," says Llamas.
Some of the wearables slump last year can be attributed to bad timing, as consumers waited for new products to reach the market. That changed in 2017. Google released Android Wear 2.0, allowing its smartwatch partners to update their products. And both the Apple Watch Series 3 (with a $329 starting price) and the $300 Fitbit Ionic began shipping late this year.
Apple's revamped smartwatch could be especially important for market demand. In March, Nicole Perrin, an analyst at eMarketer, blamed the Apple Watch for a "wrist-worn revolution" that failed to materialize, saying Apple's smartwatch didn't generate the level of mass appeal eMarketer had expected.
Not long after publishing her report, though, Perrin says eMarketer noticed that demand for smartwatches in general, and the Apple Watch in particular, was actually starting to take off. "It is finally happening that the fitness tracker space is giving way a little bit to smartwatches," she says.
Apple has a history of energizing a market. We saw it when the iPod transformed the music player industry, for instance, and again when the iPhone practically redefined smartphones. Analysts have been waiting for the Apple magic to kickstart the smartwatch market.
So far, though, the Apple Watch is an also-ran to Fitbit, according to Forrester analyst Gina Fleming. Half of adults in the US who use wearables have a Fitbit, Forrester reports, while 25 percent use an Apple Watch.
That could change, according to analysis from investment banking firm UBS, which in October said the Apple Watch Series 3 "could be one of the most popular watches in the world."
IDC's Llamas thinks the Series 3's cellular connectivity could be a game changer.
That cellular thing
Adel Ejjeh, 27, swapped his Fitbit Blaze for an Apple Watch Series 3 with LTE last month. The Apple Watch "is as good as the Fitbit, or maybe even better" for fitness tracking, he says. But the University of Illinois Ph.D. student now uses his smartwatch to place calls and send texts when he forgets his phone or steps out of the office to grab a coffee. Ejjeh credits the switch mainly to brand loyalty (he also has an iPhone and a Mac), but says the cellular feature is worth the $10 more each month on his phone plan.
Such increased functionality gives people a reason to use their wearables, says Creative Strategies analyst Ben Bajarin. "People have really figured out what they want [a wearable] for, and they're using it just for that. Because of that, they're not abandoning them at the same rate."
That's been true for Julie Travers, 56, president of Julie Travers Marketing Services, who says she's worn her Apple Watch Series 2 every day since she got it in April. An avid runner, she wanted a smartwatch that could track her workouts and also let her see incoming calls and texts without her having to pull out her phone.
"If I'm in a meeting, I can look at something really quick without being disruptive with my phone out," she says.
The growing popularity of smarter timepieces helps explain why smartwatches are co-opting features previously associated with fitness trackers and GPS sports watches, says Parks Associates analyst Kristen Hanich, who notes that the different categories have overlapping features.
"Basic activity tracking is highly popular, but it's a fairly standard feature," Hanich says. "Consumers want more -- which in many cases means a smartwatch."
What's to come
If Apple is any indicator, health monitoring could soon become a major aspect of wearables. The Apple Watch already has a heart rate sensor, which the company wants to use to check for heart rhythm abnormalities (atrial fibrillation) too. It's also launched an AFib heart rate study with Stanford University that anyone can opt into and test. Now, there's a new for the Apple Watch that gives on-the-spot EKG readings.
Voice assistants will likely show up in more devices next year, too. Hanich expects Samsung will soon offer devices with Bixby, and Alexa could find her way into more gadgets. Llamas thinks wearables will tie into the internet of things. That means, for example, your watch could start your car's engine when you're 200 yards away, turn on the heater at 150 yards and switch on your favorite music service at 20 yards.
But is that enough to transform wearables into must-have devices?
"None of us expected this market to be one that you flip the switch and then 1,000 flowers bloom," says Llamas. "There's going to be a lot of switches, and there are going to be a lot of different flowers, too."
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