On Monday, IDC released its http://www.idc.com/getdoc.jsp?containerId=prUS41996116″>third quarter market share update for wearables and it was not pretty. While overall shipments grew marginally year on year, reaching 23 million, 85% of sales remained in the more aggressively priced fitness bands. The third quarter results need to account for the launch date of Apple Watch Series 2 late in the quarter. Small as it might be, Apple is still dominating the smartwatch market, and I do not see this changing anytime soon. In an email to Reuters, Tim Cook attempted to set the records straight by saying, “Sales growth is off the charts. In fact, during the first week of holiday shopping, our sell-through of Apple Watch was greater than any week in the product’s history. And as we expected, we’re on track for the best quarter ever for Apple Watch.”
The Smartwatch Market Shares Many Similarities with the Early Tablet Market
When looking at the wearables market, it is hard not to draw a comparison to the early stages of the tablet market. As a quick reminder, after the launch of the iPad and an initial influx of tablets that tried to compete with it, Android manufacturers relegated themselves to the lower part of the market. Here, consumers were happy to spend money for a more limited experience, more in common with a media player than a PC. As several Chinese players entered the space, tier one players defected, leaving Apple to control the most valuable part of the market.
The longevity of the tablet category seems to depend on tablets establishing themselves as PCs, thus coming full circle from the very device they wanted to differentiate themselves from. Right off the bat, tablets replicated our smartphone experience, giving us the apps we know and love optimized for a larger screen, larger batteries, and more powerful processors. As smartphones grew in both in size and power, there was little differentiation left to be delivered. Failing to find their place between the smartphone and the PC, tablets had to try and replace one of these devices and, as no consumer in their right mind would give up their smartphone, the PC became the obvious target. Vendors are soldiering on in this space either by making devices look like a tablet and masquerading as 2-in-1s or trying to position them as the next computing platform.
Smartwatches Have No Point of Reference
Wearables, like tablets, are struggling to become a must-have for consumers. As it was for tablets, the market is polarizing towards the lower end where fitness bands offer a limited focus, simpler value proposition and, most importantly, more affordable price points.
The route to success for vendors will have to be very different, as smartwatches will not benefit from going full circle to either of the products they sprung from in analog watches and smartphones.
Tablets had a much easier starting point than wearables. Replicating what the smartphones could do was relatively simple, and although, many consumers remain to be convinced, the value proposition was clear.
For wearables, it was much harder. Early fitness bands have not become a mass market gadget, which makes understanding how a very personal device like a smartwatch could appeal to a very diverse group of people quite difficult. The combination of always-on and a small screen requires information to be displayed uniquely, both in layout and prioritization. This calls for both user interfaces and applications to be rethought. Apple, which generally does not enter a market still in its infancy, understood there was a need to learn directly from users with real life experience. The improvements to Apple Watch UI as well as the refocus around health are direct learnings from that first market seeding.
With an improved GPU on Apple Watch series 2 and series 1, we are also seeing new dedicated apps better catering to the use case rather than being a replica of the phone app.
Personal Means Finding Different Hooks
Fitness and health in the wider sense will offer little opportunity to devices in the high-end. This is because, for most consumers, fitness and health translates to simple measures such as steps and calories and these can be delivered by devices that cost a fraction of what smartwatches cost.
Adding value to these categories requires some degree of evangelizing by vendors. Apple has gone quickly down this path by showing active calories, a comprehensive list of workouts, stands, and, more recently, breathing. Gamification of health and fitness will appeal to some users, while ties into online coaching services or health insurance rewards might add value for others. Creating an ecosystem that adds value and has the user think such value comes from the device they are wearing is key.
However, the difficulty of wearables is the very personal nature of the device. Not all users find the same value from the same features. With smartphones, it was easy. No matter what apps we had on them, we all did one thing: make calls. Outside of health and fitness, there are other areas where I see an opportunity to hook consumers with wearables:
Payments: much more convenient than taking your phone out of your pocket
Authentication: today, it might be unlocking your Mac or your phone. Tomorrow, it could be your home or any of the smart devices in your home or office.
Decluttering inbound information: if used properly, a smartwatch can help you declutter your information flow by letting you see only what matters to you when it matters to you. Setting up what social media, emails, text messages get to you allows you to stay more in control without getting overwhelmed by being connected anywhere anytime.
Reclaiming your time: by allowing you to see what matters, smartwatches also help you decide what needs attention straight away or can be deferred. Admit it, when you see a text or an email, often it does not require you to act on it immediately. If you just read messages on your phone, you feel compelled to reply and, once you are on your phone, you might as well check Twitter or Facebook or read that other email that arrived earlier.
Most of the examples I outlined here speak more to a user who is technologically very engaged than a mainstream user. This is not the same as an early adopter who often also has a larger disposable income. Technologically engaged users who have multiple devices, are engaged with apps, and spend most of their time connected will see the appeal of smartwatches when properly positioned but might not see the value at the top of the price range. Apple’s move to update the GPU in the Apple Watch Series 1 while selling it at a lower price speaks to this point exactly.
Where Does This Leave Android Wear?
Frankly, this leaves Android Wear with a lot of work to be done. It seems to me that not much was learned from the tablet market poor dedicated app ecosystem, lack of software differentiation and market guidance for the vendors. The slow software update cycle, as well as the limited improvements, clearly point to a Google that has bigger fish to fry at the moment and it is unwilling to invest in a market that has yet to prove itself. Or, and I hope this is more the case, to an Android Wear Team that is regrouping to figure out how to deliver true value.
Wearables could turn out to be important assets in both the connected home and AI battles. So, while hardware might never give vendors the sales volumes they were hoping for, it might give them yet another access point to highly valuable users which, in the long run, will prove an incredible investment. Apple knows this and continues to invest in the space. Sales results from Watch Series 2 might convince others there is more to wearables than a race to the bottom.
I’m wondering if there aren’t a few large differences between tablets and smartwatches:
– watches are conspicuous consumption, stay-at-home tablets not so much.
– tablet features plateaued early on (pen and windowing where on Samsung’s 2011 Note 10, I’m still using it, my only issue is with watching h.265 content), smartwatches are still missing important stuff (speed, storage, data connectivity, touch ID,…)
– watches/bands seem to suffer from high disuse, tablets not so much
– tablets now go up against convertibles, I actually buy mine dual-booting Windows and Android for that 5% of the time Windows does it better.
In the end, I get the feeling that tablets met a need… and the v1 tablets mostly are still meeting it hence low sales; while watches don’t quite meet a need (except very specialized ones: the ultrasocial, fitness but that one is better served by trackers).
I’m a bit doubtful about your use cases though:
– payments: is taking the phone/wallet out that onerous ? Assuming it’s not already in-hand. Isn’t caring for a watch more onerous ?
– authentication: indeed, I’ll even go with just logging me into all my apps on all my computers. Wake me up when it works.
– decluttering inbound info and freeing up time: that’s not the watch, that’s the AI+configuration. You can achieve he same results on your phone.
And you seem to overlook a biggie: handling a watch takes 2 hands, where handling a phone only takes one. I could do most stuff quicker on my phone, and multi-task while doing it, so I junked my trial smartwatch.
I’m still rooting for glasses ^^
PS: Couple of issues with your characterization of Android tablets:
– “As several Chinese players entered the space, tier one players defected”… which ones ? Dell and HP didn’t so much defect as never really enter (they each released 1 series ?), Samsung Asus Lenovo Acer Google and Sony are still active…
– ” Android manufacturers relegated themselves to the lower part of the market”; “a more limited experience, more in common with a media player than a PC”. Not quite. that’s where most of the market is, but high-end Android tablets are still more amenable to a PC-ish rich experience than iPads: support for USB peripherals such as mouse, storage, webcam, keyboard, gamepad, DAC,..; direct support for HDMI; more storage; widgets; dual-booting Windows. I couldn’t do with an iPad what I do with my tablets, neither could some other people around me.
But the primary similarity is the same—why bother? The iPad held lots of promise. Still does in my opinion. But developers just aren’t getting on board. There are some great niche use cases, but that doesn’t drive a broader consumer market. For them, it turns out there wasn’t much needed between a smartphone and a PC.
I see iPads at work. They make great remote devices for lighting and sound control in live entertainment environments. They make fairly decent “don’t need a PC” device (as klahanas points out). I know several people who don’t want a PC at home. They have one at work.
But for bigger things that start on a PC and could benefit from a more remote device than a laptop, no developer bothered. For example, I would love to do some at least minor editing of my CAD drawings onsite. But the best Vectorworks can do is give me PDF markup with BlueBeam. Now that may seem helpful, in the end for my work flow and others in my industry that just adds extra steps to updating paperwork.
So in the end, there is almost zero need to buy newer tablets because the workloads are so light. No one is pushing them the way they pushed PCs.
As for the author’s watch use cases. The only problem is those are things one only experiences _after_ owning a smartwatch. No one seems to feel those are issues needing addressing much less that a smartwatch is the answer. And I believe those aren’t real issues that need addressing. Those imagined inconveniences are reasons one comes up with to justify a smartwatch purchase vs a fitness band, in much the same way an audiophile will find a way to justify paying thousands of dollars on speaker wire vs just using lamp wire.
There may have also been some marketing issues. Calling it a “smartwatch” in an era that watches are seen as superfluous vs “smartphone” when cell phones became necessities and replaced landlines, I think is an issue. Even the term “wearable” is too ambiguous.
I think tablets and wearables are going to be niche devices for quite a while to come. That’s not a bad thing. Niche is where the money is anyway. I mean “off the charts” for a small market is not really saying much. But it doesn’t have to say much. It doesn’t have to be a broad run away hit to make money. It just has to make money.
Joe
You sound like you could use a Surface ^^
I did seriously look at them when they first came out, but there was such poor support for touch in the apps I would still have needed a keyboard and mouse to be productive with it, which to me defeats the purpose.
I may still go that way if the software developers start really integrating touch support. But that is the problem with the same Windows as a tablet and PC OS. Not because of MS, but until the 3rd party developers see the need to fully support touch, they won’t. Why should they? They are happy enough that it works for one paradigm without needing to support the other on the same device.
But I really do want a tablet to be a tablet. I don’t need it to be fully a laptop replacement. I do like my Macbook Pro and I like that it has become a desktop replacement for me. I just need a tablet to be the “plus 1” to the party.
Joe
I tried for a while to do simple repetitive word processor/form filling or data entry on a tablet, but the interface was frustrating and time consuming and far faster and more reliable on a laptop. As most of this work was at a desk, the tablet experience wasn’t helpful enough for me, but Horace apparently does far more sophisticated work on his iPad, so it appears I wasn’t doing it right.
Mail triage though, general browsing, the Zinio experience, online banking and shopping seem to be well suited to the ipad though, much more than a “phone” anyway, but luckily I can afford both.
Even though I currently spend more time on the pad than phone or desk/laptop, there’s no way it can replace either, let alone both for me, yet I’m very happy with the cordless experience and the real 10 hour (or more) battery life the pad provides. The luxurious screen real estate that the big iPad Pro provides is addictive and I don’t think I can go back to the 9.7 (or the smaller phones) in spite of their portability advantages.
Isn’t it a lot more clear if you consider tablets to be the Post-Netbook? They do enjoy a broader base, but the core customer is the simple, cheap, “doesn’t need the whole PC” customer.
“As smartphones grew in both in size and power, there was little
differentiation left to be delivered. Failing to find their place
between the smartphone and the PC, tablets had to try and replace one of
these devices and, as no consumer in their right mind would give up
their smartphone, the PC became the obvious target.”
Once again, an analyst’s obsession with sales growth makes them blind to the reality of the situation. Tablets did not fail to find a place between computers and phones. It’s just that they were so badly wanted that their initial sales far outstripped the category’s natural sales levels, giving everyone an exaggerated idea of the size of the tablet market.
Ipads launched into a market where people had a deep need for some kind of highly portable, reasonably affordable internet access appliance that was bigger than a phone. Netbooks had been the first attempt to fill that need, but they did so very poorly, so the category tanked once a better alternative came along. Ipads were that better alternative. They sold incredibly well until the preexisting need was filled. Then sales declined to their natural levels.
The decline seems to have bottomed out or nearly so, and it turns out that at that bottom, Ipads outsell macs by more than 2 to 1. If that’s the definition of something that fails to find its place, then everyone should be so lucky to have a product that fails to find its place.
You’re exactly right about the exaggerated idea of tablet sales. I did some rough math back when iPads were selling like crazy, and if that rate of sales didn’t decrease dramatically the iPad would have been selling a couple billion units per year within a few years. Obviously that was never going to happen, so we saw the iPad settling down as one of the top selling PCs on its own.
“The decline seems to have bottomed out or nearly so”
So far, that’s the story the numbers tell
http://disq.us/t/2gojpm8
Thank you for the citation. From the link:
“With Lenovo’s new
smartphone offering a 6.4″ display, it’s clear that there’s a sweet spot
in that tight range that interests consumers”
Good grief, how dumb. Maybe they were buying a tablet because they didn’t want to buy a device that required a data plan and included an expensive wireless data chip in it? maybe they wanted it because they already have a perfectly nice, pocketable phone that is too small for the uses they plan to put the tablet to? Maybe they want two devices so they can enjoy double the battery life, or so they can have a device that their as-yet phoneless kids can use?
There are scads of reasons to buy a tablet in addition to a smartphone, no matter how large the phone may be.
But don’t you understand that if I have one foot in ice water and one foot in boiling water it should feel like I’m in a sauna? 😉
I got them all ! Phones 5.2, 6, 6.4 and 7″, tablets 7, 8, 10 and 12″. (well, the 7″ phone got drowned, the rest are still in use). And I still don’t know which one I like best, nor which combination of 2 sizes I like best.
The 12″ is a pain to carry, but really comfy to use., and it’s really not that much bigger/heavier than the 10″. I’ll sometimes slide the 8″ in my coat pocket if I’m going to need Windows (yeah for dual-boot !) or if I want to multitask (2 screens beats splitting my phone’s screen between 2 apps). Around me, kids like smaller tablets, adults bigger ones.
As for phones, there really isn’t a huge difference. Once you’ve learned to handle a large phone (don’t grip it !), 5.5 or 6.5″ is the same. Video is the killer app for larger phone sizes, maybe some games too. It used to be battery too, but there are long-lasting 5.5″ phones these days.
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