Back in 2015, when Apple announced its release of Apple Watch Series 1, doubts and criticisms on the big medias were all around over Apple’s choice of entering the wearable technology industry. When the sales number didn’t go as predicted after a couple of months of the release, Apple Watches were pictured as flopping because they were not powerful or fashionable enough and was “not for everyone” . However, it started to show its potential in 2017 and became not only the most popular smartwatch but also the most popular watch in the world .
What value do the smartwatches create?
- Checking time in dark. Yes, this has not been an issue for a long time since we had cell phones. However, a smartwatch is still a watch. It allows people to check time in dark without being too disturbing for the others compared to checking on phones.
- Activity Tracking. Smartwatches have the full capability to substitute the fitness wristbands. With the increasing awareness of healthy life style, smartwatches connect personal data to their smartphones more seamlessly compared to the original wristbands. Also, compared to smartphones, the wearable devices track activities more accurately.
- Notifications that further “addict” people to their phones. Once the smartwatch is connected to a phone, people can get alerted whenever they get a new phone call, message, or reminder. This feature helps people to not miss anything from their phones any more.
- Making phone calls. Since the addition of LTE to the smartwatches, they are now standalone devices that can be used apart from the cell phones. This increased the flexibility of people using the devices.
- More complicated features. Smartwatches can also be used to perform many other activities compared to digital wristbands, such as navigation, find my phone, and contactless payments, etc. 
- Tech-savvy Fashion. Usage of wearable technologies could show a person’s openness to new technologies and build a tech-savvy image.
- Additional and more accurate personal data. The wearable devices get businesses access to even more personal data with the devices attached to consumers.
- Creates loyalties to operating systems. The smartwatches, although could be used as standalone devices, are still more powerful being synced with the smartphones. Having single operating systems on the watches in return keeps consumers staying with their original phone brands or systems.
How do companies capture the value?
The biggest value of the smartwatches is unarguably the sales revenue. The most popular brands’ smartwatches price ranges from $150 to over $1000 depending on the feature consumers choose. Beyond the revenue, taking Apple as an example, the ecosystem of the connected devices they are creating explains their success . By expanding the business to smartwatches, they further retain the loyalties of the customers and create more sales of the other products.
And the award of leading the growth of smartwatch industry goes to… Apple! The release of the most popular smartwatch Apple Watch Series 1 “officially” introduced consumers to the wearable technology with more Apps linked to smartphones. Like the 4G technology, it appears that whoever took the first stab to get into the market dominated it. Although there was a slight slide on the sales in 2018, Apple still held 41 percentage of the market share .
Not only Apple proved their decision right, they also created a new global market that is predicted to be increasing by 36% over 2018-2024 . On a side note, smartwatches seem to be their first step into the wearable technology. AirPods followed as the second. Together the wearables had achieved a revenue of more than $10 billion from Q2 2017 to Q2 2018 .
Certainly, Apple is not the one and only winner in the smartwatch market. They pioneered but the others are catching up quickly as well. Since the debut of Apple Watch, Fitbit, Xiaomi, Garmin, Samsung, and Fossil have also joined the market and are contributing to 74% of the total market share along with Apple .
Out of the big 6 players above, Fitbit, Xiaomi, and Garmin were already leading the fitness tracker sales in different regions before Apple launched its watches. In 2017, the two major players accounting for 80% of the total sales in the fitness tracker market, Fitbit and Xiaomi, were under a huge impact and had a drop on sales of their fitness trackers for 18% in total . It is a good sign though, that Versa, the smartwatch of Fitbit, was catching up in the smartwatch industry and increased their market share from 8% to 21% from Q2 2017 to Q2 2018 . These wearable technology companies were strong enough to upgrade their activity trackers into a full version of smartwatches and are revealing their potential on catching up with the market.
The industry that worries the most by smartwatches is probably the traditional watch industry. Although it is difficult to extinct mechanical watches, the industry has been hit the second time since the prevalence of smartphones. The smartwatches have made the sales of watches under 3,000CHF stagnant and are slowly reducing their sales of the luxury ones as well . 2017 was the year that Chinese market became strong again and rebooted the Swiss watch industry by 2.7% . However, if the Swiss watch factories do not catch up quickly enough in the digital market, it is hard to imagine how many will survive along the time when the digitalizing trend continues.
People could argue that Google is lagging behind with their lack of commitment in the Android system wearable devices . Nonetheless, with Samsung being the largest Android system player and Google’s main business being advertisements, the impact of the smartwatches would not be nearly as significant compared to the traditional watch industry.
Conclusion and Future Outlook
Apple has long been good at creating new markets that drives the slow adapters out. Firstly iPhone, and now the wearables. They proved their success in creating the smartwatches, opened up the wearable technology market, and has already made the second move on AirPods. The future looks bright from Apple’s market entry of the wearables, but they also need to watch out for the rapid catching-ups, such as Fitbit and Samsung. Other than that, it is still exciting to be looking forward to the debut of their next wearable product after the AirPods and see how Apple surprise us once again.
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