Wearables are set to come into their own this year, and will reach 228-million devices shipped by 2020.
According to a new report from the M2M/IoT analyst firm Berg Insight, shipments of connected wearables reached 72,5-million in 2015, up from 25,3-million devices in the previous year. Growing at a compound annual growth rate of 25,8%, total shipments of smartwatches, smart glasses, fitness & activity trackers, people monitoring & safety devices and medical devices as well as other wearable devices are forecasted to reach 228,3-million units in 2020.
Bluetooth will remain the primary connectivity option in the coming years. A total of 17,8-million of the wearables sold in 2020 are forecasted to incorporate embedded cellular connectivity, mainly in the smartwatch and people monitoring & safety categories.
Apple entered the connected wearables market in Q2-2015 and quickly became the leading smartwatch vendor. The competition is responding with increasingly capable and attractive devices from Android Wear vendors including Motorola, LG, Huawei and Asus as well as from vendors betting on other platforms such as Samsung and Pebble. Smartwatch sales have picked up considerably during 2015 and shipments are on the track to reach 19,5-million units by the end of the year, a 353% increase year-on-year.
“This market development has not gone unnoticed by the traditional watch industry and several vendors including Fossil and TAG Heuer have presented smartwatches of their own,” says Johan Svanberg, senior analyst at Berg Insight.
Improved devices available in different price segments will drive adoption in the next five years and smartwatches is predicted to become the largest device category by the end of the forecast period. Today, fitness & activity trackers is still the largest device category and shipments are expected to reach 51-million units in 2015. Market pioneers such as Fitbit, Jawbone and Garmin have in the past years been joined by an abundance of companies including major players from the smartphone industry.
“Xiaomi has been particularly successful with its affordable trackers and the company is the only fitness tracker vendor which can compete with Fitbit in terms of sales volumes” comments Svanberg. This product category is now facing fierce competition from smartwatches that in many cases include activity tracking features. Decreasing prices and new form factors will still enable dedicated fitness & activity trackers to reach shipments of 71-million units in 2020.
Connected wearables such as cardiac rhythm management devices, ECG monitors, mobile Personal Emergency Response Systems (mPERS) and wearable computers are already common in the medical, people monitoring and enterprise segments.
Furthermore, miniaturised electronics, low power wireless connectivity and cloud services have enabled the development of a wide range of new connected wearables such as authentication and gestures wristbands, notification rings, smart motorcycle helmets and smart gloves.
Shipments of smart glasses have so far been very modest, but promising use cases in professional markets as well as in niche consumer segments will enable smart glasses to become a sizeable connected wearable device category in the next five years.
Gartner points out that mobile payments are gaining acceptance among consumers in North America, Japan and some countries in Western Europe, with half of consumers in mature markets expected to be using smartphones or wearables for mobile payments by 2018. This is just one of many innovations impacting customer preferences in the personal technologies market.
“Innovation in apps, mobile devices and mobile services are impacting traditional business models, particularly in the way people use personal technology for productivity and pleasure,” says Amanda Sabia, principal research analyst at Gartner. “Product managers must understand who their customers are for these new devices and services, and how the products are being used. Knowing your customer is imperative in order to capture a fair share of spending opportunities in this dynamic marketplace.”
When it comes to mobile payments, there are three types of mobile payments or mobile wallets available now: smartphone or wearables-based payments, branded mobile wallets from banks or credit card providers, and branded mobile wallets from retailers such as Starbucks.
However, mobile payments using Near Field Communication (NFC) technology (Apple Pay, Samsung Pay and Android Pay) will be limited in the short to midterm due to a lack of partnerships between retailers and financial organizations, as well as consumers seeing little value in such payments. “Any mobile payment wallets that are tied to the device will have limited adoption and only if the device has a huge installed base,” says Annette Jump, research director at Gartner.
“Instead, cloud-based solutions will have a better chance to succeed as they can reach a wider audience and can support many use cases beyond face-to-face or in-store options. Also, mobile payment and mobile wallet adoption requires a country-by-country rollout plan with an enabled payment infrastructure and agreement with major banks and retailers.”
Gartner made two further predictions for the personal technologies market:
* By 2018, 75% of TV-style content will be watched through application-based services in mature markets – “The increasing prevalence of application-based TV-style viewing will be disruptive to the traditional pay-TV market. Consumers are already cutting back on premium pay-TV channels in favor of subscription video on demand (S-VOD) services such as Netflix and Hulu Plus,” said Derek O’Donnell, senior research analyst at Gartner. “We expect that this phenomenon will continue to accelerate over the next three years, putting pressure on the revenue of pay-TV operators, particularly from premium channel subscriptions.” As the mainstream market spends more time viewing TV through applications, more households will begin to “cut the cord” entirely, putting additional pressure on traditional pay-TV service providers. Pay-TV operators will need to provide application-based functionality for their content in order to remain competitive in an ever-increasing app-based TV-viewing culture.
* By 2019, less than 20% of users in mature markets will subscribe to mobile data-only connections – Since the launch of 3G and even more so since 4G has become the new standard for mobile broadband in mature markets, mobile data consumption has been increasing. Most of it still takes place on smartphones, but communications service providers (CSPs) have been promoting mobile data-only connections as a complement to fixed broadband accessed through Wi-Fi, when consumers need the flexibility to use their data-centric devices on the go.
“In markets where fixed broadband and Wi-Fi is widely available, and where CSPs’ offerings are allowing tethering as part of their mobile offerings, the value-add of a stand-alone mobile data-only connection is harder to demonstrate,” says Stephanie Baghdassarian, research director at Gartner. “Also, when focusing on tablets specifically, it has to be noted that cellular-enabled tablets are noticeably more expensive than Wi-Fi-only versions. This is yet another inhibitor to mobile data-only connectivity uptake.”
