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Jan 15, 2015

Wearable Market Trends and Signs of What is to Come

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For the second year in a row, wearable technology was a major theme at CES. However, anyone expecting a new wearable product that was significantly different from the current mainstream, or new killer use case, came away disappointed. The reality is that the wearables at CES were, for the most part, still about fitness trackers and smartwatches that are worn around the wrist. In fact, the scale and direction being taken by wearable fitness tracker companies gave further evidence as to how much this market has matured, as we noted in the recent Consumers & Wearables survey, ‘The Demographic Divide: Fitness Trackers and Smartwatches Attracting Very Different Segments of the Market’. Below is a list of wearable themes out of CES.

Fitness Tracker Evolution 
CES saw a record number of fitness tracker OEM’s showcasing their wares, which was to be expected given how these devices now show roughly 10 percent penetration in the U.S. market. There were, however, a few key themes that became evident during the weeklong event. First of all, many popular fitness tracker OEM’s are striking partnership with Jewelry and Fashion companies as a way to produce more sleek devices that will have more appeal within specific consumer demographics that may not otherwise be interested in these devices. Misfit’s partnership with Swarovski to launch the Swarovski Shine fitness tracker is a perfect example of this trend (see ‘Misfit makes a Fashion Statement with Swarovski Partnership’). We expect to see many similar partnerships over the course of 2015 as fitness tracker OEMs look to hit more targeted demographics.

Beyond design and greater fashion appeal, it is also becoming clear that the fitness tracker is starting an evolution from a pure fitness device to an overall wellness product. In fact, most new fitness trackers are now starting to come with the ability to track sleep patterns in order to help users understand how much ‘quality’ sleep they are getting. In addition, several fitness tracker OEM executives also mentioned that ‘stress and anxiety’ tracking through the day, measured by breathing patterns and heart rate, will be the next feature that will help these devices transition towards being total wellness solutions.

It also noteworthy to mention that many fitness tracker OEMs have been diversifying their product ranges (i.e., introducing fitness trackers that are growing in size and becoming as functional as many modern smartwatches. Expect to see an increasing blurring of the line between many high-end feature packed fitness trackers and smartwatches throughout 2015.

Smartwatch themes
Unlike the fitness tracker space, the smartwatch OEMs at CES were still unable to demonstrate one or two killer applications. Instead, smartwatch OEMs are looking to differentiate by continuing to pack in additional features and functionality, such as on-device cellular capabilities, music playback, more apps, broader third-party app compatibility, and better screens. OEMs are also looking to improve the overall design of the smartwatch, which was seen in the Sony Smartwatch 3 – that had a more aesthetic design than previous iterations.

One part of the smartwatch conversation that was largely absent at CES was the role of the more traditional watchmakers, who still have not made much of an impact in the smartwatch space. However, expect 2015 to be the year where traditional watchmakers attempt to make their debut in the smartwatch conversation. It will be extremely tough for these watchmakers to match existing technology-oriented smartwatch OEMs in terms of features, so we expect to see some partnerships develop in this space over the next year.

Wearable Clothing and Sensors
While ‘wrist’ wearables were still the dominant theme for wearables at CES, wearable clothing with independent sensors also had their place. These wearable clothing and sensor products fell into two groups: the first group of products focused on improving consumer athletic performance through the addition sensors to clothing, which included sensors tracking vertical leaping (myVert), analyzing golf swings, and even the timing and angle of basketball shots; the second group, which featured companies like Under Armour, with clothing attachable sensors aimed to further measure athletic output, effort, and stress, could lead to performance improvements and/or injury prevention. The final products in this category were sensors in devices such as athletic headbands that could measure impact or trauma to help prevent head injuries. Expect to see much more marketing and advertising around athletic performance-oriented clothing in 2015.

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