Fitbit fights back at Apple in the smart watch market

The latest smart watch numbers from analyst firm Counterpoint reveal Apple is still the dominant player but Fitbit is giving it a run for its money.

Total global smart watch shipments grew 37% year-on-year but it’s rapidly turning into a two horse race. Apple hijacked the market as soon as it took the segment seriously but its initial success seemed to stall. Meanwhile Fitbit more recently made the strategic decision to diversify beyond fitness bands and that move seems to have paid dividends.

Apple still dominates with a 41% of global shipments, but that’s down from 48% a year ago. Meanwhile Fitbit has managed to propel its share from 8% a year ago to 21% in Q2 2018, thanks to the apparently popular Versa smart. Everyone else is miles behind, with one-time leader Samsung now bordering on irrelevance.

Counterpoint smartwatch Q2 2018 1

“Back in Q4 2017, Apple stepped up its strategy in the smartwatch segment by enhancing the features of smart watches into broad-based functionalities, including some health and fitness tracking capabilities,” said Satyajit Sinha of Counterpoint. “Moreover, Apple is catalysing the trend of ‘smart watch as a standalone wearable device’ with adoption of cellular connectivity, which is driving the new wave of cellular connected wearables globally, great news for mobile operators.”

It doesn’t look like the market got the memo about standalone smart watches, however. As Sinha’s colleague Neil Shah notes, people seem reluctant to pay the premium just for the opportunity to talk to their wrist like a nut-case.

“Despite initial hype and traction of cellular based Apple Watch Series 3 in the first two quarters, Apple iPhone users are actually choosing the Series 1 as a non-cellular option over Series 3 non-cellular model which is surprising to many industry watchers,” said Shah. Not all industry watchers mate. The strong inference here is that Apple hasn’t done much to improve on the Series 1 other than whack in an expensive and largely redundant modem.

As indicated the Apple Watch Series 1 is the best selling model, followed by the Fitbit Versa. Given that Chinese vendor Amazfit has the third best selling brand despite only having a 4% total market share, that implies these two models are by far the biggest sellers. Unsurprisingly the Fitbit Versa is significantly cheaper than any Amazon Watch, so it wouldn’t be surprising to see it continue to grab share in the coming quarters.

Counterpoint smartwatch Q2 2018 2

Maybe Fitbit can be more than just a niche exercise product

Fitbit might not be turning in the results of yesteryear, but riding the wave of Versa to beat analyst expectations demonstrates there might be mass-market appeal for the brand.

Total revenues stood at $299.3 million for the three months ending June 30, and while this is still considerably down on the $353.3 produced in the same period for 2017, it beats expectations from analysts. The success for this period has been attributed to Versa, the team’s attempt to break away from the fitness-tracking niche and enter into the mainstream smartwatch market.

“Our performance in Q2 represents the sixth consecutive quarter that we have delivered on our financial commitments, made important progress in transforming our business, and continued to adapt to the changing wearables market,” said CEO James Park.

“Demand for Versa, our first ‘mass-appeal’ smartwatch, is very strong. Within the second quarter, Versa outsold Samsung, Garmin and Fossil smartwatches combined in North America, improving our position with retailers, solidifying shelf space for the Fitbit brand and providing a halo effect to our other product offerings.”

Overall, Fitbit sold 2.7 million wearable devices across the quarter, with the average unit price increasing 6% year-on-year, primarily down to the newer product releases. Those devices released in the last twelve months accounted for 59% of total revenues, providing confidence in the brands ability to diversify from the niche which has served it so well through the underwhelming years for wearable devices.

Fitbit launched the Versa on 16 April and boasted about selling one million devices just over one month later. The product is more in-line with what you would have expected from a smartwatch device, moving beyond the fitness tracking niche Fitbit has become known for. Just looking at the device demonstrates the shift, though what’s on the device is what counts, as it features all the apps we have become accustomed to. It is a big move from Fitbit, and it looks to have worked.

Perhaps this is a positive sign for the wearables industry on the whole. For years, Fitbit appeared to be the only wearables brand which could survive as devices failed to meet the expectations of consumers. Maybe the consumer was not ready for the wearables craze, but the simplicity of Fitbits fitness trackers worked. In being able to move out of the niche and into mass-market appeal, this might be a sign the general public is ready to embrace wearables on the whole.

Looking at the share price, it is still way down on the peak from 2015, some 87%, but there have been signs of recovery across 2018. There is a notable dip in the last 5-6 weeks, though should Fitbit be able to maintain this venture into the mainstream market, we can only see the share price going up.

Fitbit Shareprice

Somehow Fitbit continues to make the wearables market work

While everyone else seems to struggle to make any money in the floundering wearables market, Fitbit has boasted of shipping more than one million Versa devices since general availability began on April 16.

Fitbit’s Versa smartwatch has been marketed as a ‘personalized daily health and fitness companion’, featuring an on-device health dashboard, tetherless connectivity, mobile payments, Android quick replies and healthy battery life. Aside from having a use which is appealing to a niche, but dedicated demographic (fitness and health fanatics), pricing the product at $199.95 makes Versa accessible. With more than one million shipments inside seven weeks, it seems Fitbit might be onto another winner after a couple of difficult months.

“With Fitbit Versa, we are delivering on our promise to offer a true mass appeal smartwatch with engaging new features,” said James Park, CEO of Fitbit. “The positive response to Versa shows that we are filling this void and well positions us to gain share of the fast-growing smartwatch market.”

Despite Park’s positivity, the company has been struggling in recent months. The firm announced sales of $247.9 million for the quarter in May, and while this number was up on analyst expectations, it was short of the $298.9 million generated during the same period of 2017, and even further behind the $505.4 million in Q1 2016. Fitbit had defied the trends in the wearables community for years, but it seemed time had caught up. That said, the numbers being quoted for the Versa device seem to offer hope.

For years Fitbit has seemingly been one of the few companies who was able to make headway in the struggling wearables market. In truth, the technology was not, and probably still isn’t, ready. Standalone connectivity was a big step forward last year, if a device was tethered to a phone what was the point, but the simplicity and niche appeal of the Fitbit exercise devices made it a lucrative venture for the team.

Another positive move for the team seems to be the launch of a new female health tracking feature, which has been downloaded by 2.4 million users. Entering into the services market is certainly a good move for Fitbit, as the last six months have shown how dangerous the product market can be; Versa was needed to recapture momentum, though recurring revenues through apps is a sensible supporting revenue stream.

This is not the moment of euphoria for wearables, Nokia’s plight with Withing’s demonstrates Fitbit is the exception not the rule. The product is still reliant on the development of other technologies before it becomes a genuine feature of the connected economy. Standalone connectivity was an important step forward, but the voice interface will be another one, as will eSIMs, gesture control and specific connectivity plans for the devices.

Fitbit might be able to make this space work right now, but there is still some way for everyone else.

Fitbit struggles epitomise uphill climb for wearables

Declining revenue for fitness tracker brand Fitbit is a perfect example of the fight the wearables segment faces in the battle to remain relevant in the super-connected era.

For years it seemed Fitbit was the only brand out there which could actually make money from the long-suffering wearables segment. The promise had been wonderful for the devices, but in reality, brands were constantly chasing the fictional pot of gold. Even Apple, with its legions of cult-like iFollowers, strained to make the technology lucrative, and it seems Fitbits run of good-fortune is lacking fitness.

For the last three months, Fitbit bagged $247.9 million in revenues, up slightly on analyst expectations, but quite a bit short of the $298.9 million generated during the same period of 2017. This compared to $505.4 million in Q1 2016 and $336.8 million in 2015. It seems the boomtime for fitness trackers has ended, but someone forget to tell the management team.

“The strong growth and defensibility of our business continues to be powered by product innovation, the network effects of our community, our expanding global distribution, and investment in our brand,” said James Park, Fitbit co-founder and CEO. “Based on the first quarter’s performance and momentum, we are confident about the remainder of the year, which is reflected in our increased guidance.”

Prospects for the rest of the year might well be good, but you can’t argue with the figures. The devices are simply not in high-demand as they were in yesteryear. Fitbit should be worried, as should the rest of the industry; if Fitbit can’t make the segment work, what hope is there for anyone else?

The smartwatch and overall wearables segment has struggled for years to make any meaningful impact on the technology world. In truth, there was little point to the devices; smartwatches did not do anything a smartphone couldn’t, and until recently, weren’t able to function without being tethered; consumers were not prepared to make the swap. There is little point in a smartwatch. However, Fitbit found a niche.

In creating an affordable device, with a specific purpose and targeted at specific audience, Fitbit discovered success. This was not a connectivity device, nor was it a fashion statement, it was simply a fitness tracker. It was a sensible strategy, as sportspeople are often open to spending on premium devices which serve a purpose. It was a niche and limited usecase for Fitbit, but it worked. Some might also have hoped the normalization of the technology in this niche might have created momentum for other, more profitable usecases focused on connectivity. But what does the latest dent in Fitbit spreadsheets mean for the segment on the whole?

We suspect the wearables euphoria was pumped too early. There are usecases for the technology out there, but it is by no-means going to be a revolution because the practicalities of the devices are lacking. Wearables could well make an impact on the communications world in the future, but we suspect this won’t be reality until the voice interface has taken hold.

Unless smartwatches offer something smartphones don’t, they will probably be viewed as a replacement. However, with the touch interface still commonplace, the screens on watches are not practical for everyday use. The voice interface is starting to gather some momentum, which could make the concept of a screen redundant when it comes to communicating (i.e. dictating messages, voice commands to answer calls, a virtual assistant reading out written content) and offer a place in the world for wearables.

Fitbit struggles should be viewed as a significant concern for the rest of the wearables segment. There might be a time for the devices, but now is not that time.

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Fitbit finally launches a smartwatch in bid to reclaim wearables crown

Long-time wearables king Fitbit has belatedly got into the smartwatch game in a bid to fight back against Apple and Xiaomi.

As you would expect, the Fitbit Ionic comes at the smartwatch category with a distinctly health-and-fitness bias. A prominent feature is an SpO2 (peripheral oxygen saturation) sensor, which can apparently tell how much oxygen there is in your blood. This seems to be the sort of thing health/fitness fanatics like to obsess over so it’s likely to be a crowd-pleaser.

First and foremost Fitbit needs to make sure that side of things is beyond reproach and hopefully better than anything other smartphone vendors have to offer. But for this move into smartwatches to be a success Fitbit needs to ensure it’s at least adequate when it comes to other presumed benefits of such a device, such as smartphone syncing and contactless payments.

The Ionic runs on Fitbit’s own OS, presumably derived largely from the Pebble acquisition. Apparently it can receive smartphone notifications, but doesn’t really offer much in the way of further interaction. It does support contactless payments, but via Fitbit’s own pay service. Other USPs include longer than average battery life and an Adidas-branded special edition.

“With Ionic, we will deliver what consumers have not yet seen in a smartwatch – a health and fitness first platform that combines the power of personalization and deeper insights with our most advanced technology to date, unlocking opportunities for unprecedented health tracking capabilities in the future,” said James Park, co-founder and CEO of Fitbit.

Even if we take all that hyperbole at face value the Ionic faces the same challenge as the rest of the smartwatch category: providing sufficient utility to justify the price. At a price point of $300 it doesn’t significantly undercut its competitors and it lacks the reassurance of being aligned to a major mobile platform. Right now it’s not obvious why consumers should either pay the premium (basic Fitbit bands start at $20) or risk moving to an unknown platform.