The smartphone industry is put under a lot of scrutiny and analysis year after year, and rightly so. It is one of the biggest industries in the world and one of the cornerstones of the technology industry at large. However, there are certainly other markets that have emerged as a direct consequence of the smartphone industry. These markets that feed off the popularity of smartphones are becoming quite sizable in their own right. The most notable example of such an industry is the tech wearables industry. Over the past few years, the increased proliferation of smartphones and the emergence of smartwatches has boosted the industry with rapid growth and consumer adoption.
Gartner recently released a report on the current state of the wearables market across the world. Let us have a closer look at the report’s findings and what they might mean for the industry in general.
Bluetooth Headsets And Smartwatches Driving Industry Growth
Sales forecasts for the wearables industry for 2017 are very positive. Gartner estimates 310.4 million wearable devices in sales worldwide, representing an increase of 16.7% YoY over 2016. These sales will amount to a net revenue of around $30.5 billion.
The biggest contributor to sales numbers continues to be the Bluetooth headset category, with an estimated 150 million unit sales in 2017. This represents a 16.7% YoY growth over last year’s 128.5 million sales. This category is expected to grow throughout 2021 when sales are expected to number over 200 million. A large huge driving factor behind this growth is undoubtedly the emerging trend of eliminating the traditional 3.5 mm headphone jack from some newer smartphones. Apple started this trend with the iPhone 7/7 Plus, and many other OEMs are expected to follow the suite in the near future.
Another significant contributor is the smartwatch segment. The sales of Smartwatch is expected to touch 41.5 million in 2017, a 19.3% YoY increase over 2016. Smartwatches also have a much higher revenue share than expected at $9.3 billion. This number is over 30% of the total wearables industry revenue. Strong growth is expected in this industry, with sales almost doubling to 80.96 million by 2021.
The Evolution Of The Smartwatch
One of the more interesting facets of the report was the unexpected direction smartwatches are heading in. Traditional smartwatches in the vein of Android Wear haven’t quite taken off. In fact, smartwatches made by tech companies like Asus, Huawei, LG, Samsung, and Sony are estimated to account for only 15% of the total smartwatch sales by 2021.
The only smartwatch manufactured by a tech company that has managed to be successful is the Apple Watch. Apple currently holds nearly 33% market share in the smartwatch industry. By 2021, Apple is still expected to maintain a respectable 25% market share. Sales here will be driven by expanding feature sets, such as direct cellular connectivity, texting, etc.
However, smartwatches are expected to experience significant growth from more lifestyle-oriented markets and products. One of the sub-categories is kids’ smartwatches, which will account for 30% of unit sales by 2021. These smartwatches are likely to act as a stepping stone for kids up to 13 years of age before parents buy them their first smartphone. The second sub-category expected to drive sales is the luxury and fashion smartwatch segment.
The arrival of smartwatches was met with divisive opinions. Many felt that they were a natural evolution of the traditional mechanical and digital watches, and would eventually replace them. Others felt that luxury watches would always have their place in their market as their demand was predicated on their value as fashion and jewellery accessories rather than functional technology. What actually happened was a little of both. Smartwatches struggled through much of their early years, with only the Apple Watch managing to gain any real momentum. Meanwhile, the luxury Swiss watch industry has been experiencing a decline for the past three years.
Of course, both products have certain desirable traits unique to them that appeal to customers. Luxury smartwatches have longevity and act as a fashion statement as much as a timepiece. On the other hand, smartwatches eclipse their predecessors from a pure functionality perspective. Now, many luxury watch makers like Fossil, Montblanc, Tag Heuer and more are coming up with smartwatches of their own in an effort to get the best of both worlds. Gartner believes that these brands will attempt to capture a younger demographic with this new line of luxury smartwatches. As a result, fashion and luxury smartwatches are expected to account for 25% or 20.25 million sales by 2021. This suggests that consumers see watches as lifestyle products as much as tech devices.
Sports Watches And Fitness Monitors To Stagnate
Head mounted displays (HMDs) are still in their nascent stages in terms of consumer adoption. Sales estimates for 2017 are a modest 22 million. However, HMDs form a key part of a very promising Virtual Reality industry and sales are sure to pick up in the future. Key avenues for growth include video gaming, manufacturing, training and design and even customer interaction in retail and entertainment industries. Gartner estimates 67.17 million yearly sales by 2021.
On the other hand, sales of sports watches have stagnated. Growth in this segment over the next five years is practically negligible. Similarly, fitness monitor sales are expected to stagnate in the near future. However, sales are expected to pick up after 2018 and number in at almost 59 million by 2021.