Where next for wearable tech?

The market for wearable tech is plateauing while ownership remains relatively small and far below expectations for this relatively new consumer electronics (CE) category. So, is it a temporary blip or something more terminal which might suggest consumers don’t need, want or at least aren’t ready for wearable technology in their lives.

Are aspects of this category a ‘one-gimmick wonder’, much like other CE categories before them such as digital photo frames, Flip video cameras, and compact photo printers?

In wearable tech, fitness and health has driven the market to date, accounting for 73% of units in Q4 2016 – initially this segment included pedometers and watches for sports enthusiasts (with GPS and heart-rate monitors) and then activity trackers became popular. While prices were low a lot of people bought these devices, but the replacement models were ultimately flaky and volumes are now slowing rapidly.

Among fitness enthusiasts (runners, hikers, swimmers, etc.) wearable tech is already reaching a degree of saturation, especially in developed markets like North America and Western Europe, as penetration of sports watches and premium activity trackers reaches between 11% and 15% of the total population.

For this reason vendors in this space have started to introduce new and broader functionality to products which put them in the smartwatch category as they introduce operating systems, anticipating a broader population opportunity longer term.

Meanwhile wireless watches, also referred to as hybrid watches, are affordable and have a longer lasting battery life. For the time being, at least as features develop, consumers prefer better design and usability than feature-packed devices for the wrist. Wireless watches are expected to grow by more than 20 times by 2020, powered by Fossil and Casio sales.

In 2016 wireless watches grew 36%, while smartwatches declined by over 15%. Futuresource believes the smartwatch market reached a plateau, and then will return to bullish growth in 2018. The breakthrough in the wearables market may be powered by a number of technological and design advances, which will add value to consumers by reducing the ‘pain-points’.

Smartwatches will one day allow users to leave home with their digital wallet, keys and phone strapped securely to their wrist – the watch is the ultimate form factor for convenience. In the foreseeable future mobile pay will be one application to drive the appeal of smartwatches, as the availability of pay points rise in retail and across smarter cities.

The growth in wearables payment users will largely be driven by mobile wallet opportunities from Apple, Samsung, and Google. When these are in place, 90% of the forthcoming smartwatches worldwide will come with wallets pre-installed.

Companies from the world of fashion will play their part in making wearable tech more desirable. As traditional watch sales fell for more than a decade due to the impact from mobile phones, makers are now taking ‘tech’ more seriously.

A key ‘pain-point’ for users of smartwatches is the need to charge devices regularly. The possibility of wireless charging facilitates the process, but doesn’t solve the problem. Solutions found in past portable electronics are being revisited, such as solar panels to extend the life or negate the need for charging batteries.

By 2020, with the development of the ecosystem, smartwatches are expected to incorporate smart home features. At the end of the day who wouldn’t want to be able to walk out of the house with only a watch on their wrist?