Primetime: Can Smartwatch Sales Recover?

A recent IDC report into the smartwatch market showed that most manufacturers are showing a steep decline in the number of shipped product year on year to the third quarter 2016. There was one notable exception, Garmin, which is showing a strong increase in sales year on year thanks to a number of new products and a refocus within the business. However, the overall industry is showing a decline of 52% over the year. What's going on with smartwatch sales and can the industry recover? One thing is for certain: the smartwatch market is very much in its infancy. It is no surprise that the two companies with the market leading mobile operating systems - Apple with iOS and Google with Android - have also introduced smartwatch platforms. We've also seen a number of third party companies offering their own line of smartwatch products, such as Vector Watches, Alcatel and of course Pebble.

The IDC cites a number of technical reasons why Q3 2016's smartwatch shipping numbers were down by so much. These include the impact of the Apple Watch, where in 2015 the product was available for the full quarter and Apple had generated sufficient interest in the Watch such that sales were high. Apple's second generation Watch had been rumored for a September release and this curtailed sales of the original product. When the second generation Watch hit the market at the very end of the third quarter 2016, it has only had minimal impact on quaterly sales. The IDC expects that fourth quarter Apple Watch sales will be meaningfully higher compared with third quarter. It remains to be seen if Apple's second generation Watch will appeal to more buyers than Apple fans who will buy any new Apple product when released.

Another technical factor is what is happening in the Google smartwatch market. Earlier in the year, Google announced it was working on Android Wear 2.0, the platform that underpins its smartwatch offering. Android Wear represents a major overhaul of the platform and perhaps because of this, it has been delayed until 2017. We have seen a number of manufacturers announce which of their products are to receive Android Wear 2.0, presumably in a bid to maintain sales momentum, but relatively few new device launches and this is perhaps because companies are unwilling to commit to a new design until Android Wear 2.0 is closer to readiness. 2014's Android Wear devices will not be updated to Android Wear 2.0 but early adopters will have to wait until next year for the new platform, which defers sales. Samsung too has delayed the Gear S3, which was announced in September but was not released by the end of the month, means that sales of the new, stylish Samsung device will be showing from the fourth quarter onwards.

These issues are interesting and reflect the timing of new models and platforms in what is a very dynamic space. The smartwatch market is evolving with many industry experts believing that the current trend of building devices reliant on a partnership with a smartphone will be replaced by more independent smartwatches, which will include onboard cellular data modems. We are seeing a number of these smartwatches being released (such as the Samsung Gear S3), which requires something of an adjustment from carriers in order to provide a cost effective way to put these devices on their networks. However, at the current time there simply isn't much choice for customers wanting to upgrade to a new model and gain features and benefits, with the exception of the Apple Watch as the second generation model includes water resistance. missing from the first model. Savvy consumers are not wanting to replace a perfectly functional smartwatch for a newer generation model with the exact same feature set as their old model. Looking forwards, it seems that for many consumers, the smartwatch is an interesting idea but represents poor value for money as models often cost as much as a mid-range smartphone. Today's smartwatches give customers an easy way to filter notifications on their smartwatch and track their activity levels, but the perception is that the devices can do relatively little over this. In order for smartwatch sales to recover, we need for the devices to have a broader appeal and greater functionality. Yes; smartwatch sales will recover but we are unlikely to see any meaningful progress made until at least 2017.

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About the Author
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David Steele

Senior Staff Writer
I grew up with 8-bit computers and moved into PDAs in my professional life, using a number of devices from early Windows CE clamshells and later. Today, my main devices are a Nexus 5X, a Sony Xperia Z Tablet and a coffee cup.
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