Measuring Success In Wearables: It’s Thousands of Thousands

Bob O'Donnell / March 25th, 2014

The wearables market continues to capture the imagination of the tech industry, press, and investment community. (A few actual customers also seem interested, although they almost seem secondary at this point…) Even early on, it seems clear that the wearables market is going to be significantly different from other device categories that have preceded it, such as smartphones, tablets, etc.

By definition, wearables are devices you wear on your body. Doing so creates a more intimate connection between an individual and a device and that in turn drives a more personal perspective on those devices. Plus, I believe it drives a significantly greater need for individualization and differentiation in the product. In essence, wearables become akin to fashion accessories. Just as it’s unlikely you’ll bump into two people wearing the exact same set of clothes or the same jewelry—thanks to the enormous variety of different clothing and jewelry designs and manufacturers—I believe you’ll see demand for an unusually wide range of different wearable designs and “looks”.

From a manufacturing and supply chain perspective, this represents a tremendous challenge to the traditional tech market approach. A successful tech product SKU (that is, an individual model) sells in the millions of units and typically leverages a shared set of components with a few other related SKUs from the same vendor. With wearables, however, success is likely to look radically different. Instead of a few units doing millions, there’s likely to be hundreds or even thousands of SKUs, each selling thousands of units. That is a dramatically different business model than what the tech industry has had to face and one that’s likely going to create big supply-chain headaches for companies both large and small.

Having spoken with a number of up-and-coming wearable companies over the last several weeks, it’s becoming clear this challenge is something many of them are already facing. A few have talked about developing strategies to deal with this new reality, but all acknowledge it’s a tough problem to solve.

For big companies, this could prove to be very difficult. While I’m certainly not naïve enough to think we won’t see a few big hit products follow the more traditional model (iWatch, anyone?), I do expect even in those cases, the demands for customization and personalization are going to be significantly higher than previously experienced. It might be OK if all your friends and colleagues have the same phone as you, but do you really think everyone’s going to want to wear the same watch? Even now, arguably, the “coolness” factor of having access to some of the early wearables like Google Glass and even the Pebble Smart Watch makes a bit of a statement, but how long will it be until too many people have them and they’ve lost that edgy style?

It might be OK if all your friends and colleagues have the same phone as you, but do you really think everyone’s going to want to wear the same watch?”

And this leads to yet another challenge bound to plague wearables—the fickle nature of fashion. Is that device or design in style or out of style this season? Laugh now, but my guess is, that’s going to be another completely new problem wearables will introduce to the tech industry.

Concerns aside, it’s clear there’s a lot of excitement around the wearables market, and I’m confident we will see some pretty amazing new things over the next few years. But, for those who are eager to jump into the latest new thing, I really think you need to look before you leap.

Bob O'Donnell

Bob O’Donnell is the president and chief analyst of TECHnalysis Research, LLC a technology consulting and market research firm that provides strategic consulting and market research services to the technology industry and professional financial community. You can follow him on Twitter @bobodtech.
  • encmerk

    I think this sets the manufacturers up for a device that can be removed from the shell and placed into a different fashion accessory as a reasonable form factor. It would greatly reduce the variable costs and allow you to keep up with fashion in the wearables segment as well.

    • Bob O’Donnell

      I agree and I think we’ll see a number of companies working on “engines” that can power a wide variety of different wearables. But even still, the need for different sizes and different capabilities is going to be very wide, IMO.

  • aardman

    People are beginning to realize that wearable tech is as much fashion as it is tech. I suspect Apple knew this well before everyone else, based on their hire of Deneve way back and Ahrendts more recently. Apple is the only tech brand that has the cachet to rub elbows with the haute fashion houses. I can’t see the Chanels, Versaces, and Givenchys of the world sullying their brand names by formally and visibly associating with Samsung or Google. But Apple? Especially Jony Ive?

    It’s up to Apple to capitalize on a unique opportunity where none of their competitors can follow them no matter how hard they try.

    • Bob O’Donnell

      Interesting take, but my guess is few of the fashion brands will outwardly partner with big tech firms. It’s early days, so anything is possible, but my guess is they wait things out for a while and then see how they can leverage some module-type technologies into products of their own. Will be interesting to see.

      • aardman

        “Few of the fashion brands will outwardly partner with big tech firms.” Absolutely. Because aside from Apple, “big tech firms” includes Samsung, Google, etc. My contention is Apple is in a different league from those firms.

        I have never heard of or read about a fashion designer gush about their Android phone, but I’ve read magazine interviews where a designer, unsolicited, comments about how much he/she just loves his/her iPhone. I also remember shots of one Sir Jony Ive sitting on front row during fashion week. I think it’s fair to say fashionistas know quite well who this Ive fellow is and what company he works for.

  • jfutral

    “Even early on, it seems clear that the wearables market is going to be significantly different from other device categories that have preceded it, such as smartphones, tablets, etc.”

    I would say the exact opposite, that a wearable, from a broad consumer POV, is NOT significantly different from other device categories, so much so it is mostly seen as a _companion_ device to a smartphone. This is not a compelling enough reason to buy a wearable. I don’t need a smartphone accessory. If I’m buying something else, it needs to be something else, not what I have already. I practically and functionally “wear” my smartphone as it is. Giving me one more thing to wear isn’t going to cut it.

    IMO,
    Joe

    • aardman

      I’m not sure your personal preference translates automatically to a ‘broad consumer POV’. People are ‘vain’. They invest a lot of their identity in the things they own, and the more intimately or visibly they use these things, the more willing they are to pay for ‘aesthetics’ as opposed to ‘utility’. As I said, wearables will succeed if they are seen by customers as fashion items as much as tech devices. Then people will buy ‘overpriced’ devices and more than one model of the same basic device in just the same way that lots of people own several pairs of shoes, or earrings, or watches (for those people who own watches).

      Don’t underestimate the power of ‘vanity’, or the ‘signaling of reproductive fitness’ as evolutionary biologists would call it.

      • jfutral

        Sure, but we have the capacity of vanity without utility already and watch sales are near non-existent except for the most expensive. Even bracelets aren’t as popular as they have been. So we have something already in place to measure the affect of vanity in wearables.

        Of course, something tech-centric can still address this, and that may well be the “something else” I am referring to. But based on the success of wearables to date, I would say it is safe to say that something else, whatever that something else is, does not yet exist.

        Joe

        • aardman

          Yes, I agree, whatever that something else is, still doesn’t exist. But the reason Apple has been so successful is they have been so good at coming up with highly desired products that we mortals couldn’t even conceive of. I would not predict the success of wearable tech devices based on how good or badly watches, bracelets, and other such things sell today. That would be like predicting iPad sales, before one even knows what the iPad looked like and functioned, based on how badly Windows tablets sold.

          What I’m saying is of course, wearable tech devices have to offer real utility, but if they are to be sold in serious volumes, enough to be another leg in Apple’s proverbial stool, the devices will have to make a serious nod towards fashion. Why be happy with selling one doodad to one person when you can sell five to him or her?

    • Bob O’Donnell

      Lots of people share your concerns re: wearables overall. Most are accessories to other devices right now, but the question is, can new types of notifications and/or new types of applications or usages develop taking advantage of their physical placement on your body. Will be interesting to watch, but again, it’s early days.

  • Herding_sheep

    This is a problem that Apple is uniquely positioned to solve. If anyone is going to get the fashion part, It’s Apple. And given Apple’s hires over the past year from the fashion industry, its obvious they’ve been thinking hard about this for some time.

  • stefnagel

    Wearables won’t start until Apple decides they start. Here’s why: As wearables take on the security minefields of credit, auto, and health industries, crypto engines become critical features. Steve Gibson suggests that, without superb crypto, Apple devices would be skrewed already. It’s dangerous out there.

    This level of security requires high grade chip and firmware crypto. And it requires, says Gibson, a closed, integrated hard/software system like Apple’s. Android need not apply.

    Search steve gibson ios security 446. Great bits: “The protection Apple offers is just beautiful…. To actually close the system and to ward off what would otherwise be a massive assault … they have had to take security very seriously…. Nothing short of this is enough…. Apple’s total respect for the user’s security and privacy in the design …”

    Don’t miss Gibson’s deep take on Apple security, Android insecurity. It matters.

    • Bob O’Donnell

      Agreed that security will be important for wearables, as it’s likely they could take over personal authentication capabilities from smartphones in the not-too-distant future, but not sure Apple is the only one that can pull it off. Lots of other big players, including Intel, Qualcomm, with good security backgrounds that could have a strong influence here.

      • stefnagel

        Two responses:
        * Apple is doing super crypto today. No free beer tomorrow.
        * Android lacks h/sware integration of the quality Gibson suggests is critical. And will.

      • Space Gorilla

        I don’t see how it’s possible to beat a solution from a provider that controls the stack. Sure, you can do some kind of security in a modular fashion, but come on, it’s going to be tough to beat Apple on this.

    • obarthelemy
      • stefnagel

        Gibson has done three programs in detail on iOS security, as of yesterday. I’d be delighted to hear expert critique of them, that Apple is doing a bad job of security, that Android is doing a better job of it. Where?

        • obarthelemy

          I get you like what he’s saying, but the guy is a borderline nutter, though very good at getting publicity.
          Did he conveniently forget that all this time, Apple’s SSL implementation was utterly broken ?

          • stefnagel

            Again, I’d be glad to hear a critique of Gibson’s close analysis of Apple documentation. Which seems borne out by the results noted above. Not interested in ad hominem stuff.

          • obarthelemy

            you: “Let’s simply measure it all by the results.”
            me: exemple of major vuln that went on for years

            ‘nugh said.

          • stefnagel

            My source was F-Secure. Yours? You?

          • obarthelemy

            Your sources were a discredited self-publicist and an antivirus firm (with no agenda at all, surely).
            As for my sources… the fact that you’ve never heard of the issue or chosen to blank it out is very telling. Google “Apple SSL vulnerability” and pick you choice of sources. http://arstechnica.com/security/2014/02/extremely-critical-crypto-flaw-in-ios-may-also-affect-fully-patched-macs/ for example.

    • aardman

      Speaking of security, wonder if a TouchID type device can be placed on the back of an iWatch to authenticate the wearer based on the micro pattern on the back of one’s wrist?

      • Space Gorilla

        There are a number of options with biometrics, depending on what sensors are packed into the iWatch, likely very, very reliable. I would guess holding our identity is going to be a key job-to-be-done for the iBracelet, iSensor, iRing, whatever it is. Coupled with an iPhone that should provide a high level of security.

  • Mark Bahouth

    I really enjoy your articles and viewpoints and read them regularly. And while I tend to agree with your take for wearables that are “fashionable”, I think you are missing a large part of the wearable market that will be “utility” based. Yes there are jeans that make a fashion statement, but there are many more jeans out there that are bought for work purposes or to get you to school and back. For me, more than a couple wearable devices will be “utility-based” and could sell into the millions of units (think Levis 501s or Wranglers) and the market will provide a selection of low volume devices that are high end & fashionable. And with hi-tech, there will be many combinations of current and new technology to provide beneficially useful devices. Exciting to watch!

    • Bob O’Donnell

      Thanks for the comments Mark. I think you could be right on this (and I essentially acknowledged as much in the article), but even the utility-based devices would probably need more customization options (even if that’s just colors, fabrics, materials, etc. differences) and even that, IMO, will be a challenge for many vendors. Like you said, will be exciting to watch!

    • Andrew F

      I disagree in that I don’t think it’s either or. Their comfort, utility, and also their simple fashionability are all parts of why Levi’s 501s are so popular.

      I completely agree that wearables are lacking utility, excluding the fitness stuff. Part of their limited capabilities right now are that they’re trying to shoehorn a smartphone into a tiny little screen on your wrist and no matter how well it’s implemented it’ll never be intuitive. The smartwatch people are still thinking along the proscenium arch. They’re depressingly unambitious. How is a company like Google going to solve driverless cars, floating cell towers and death (oh lord) when these are their solutions for wearable devices? It’s pathetic, to be honest.

      I think wearables not only require a whole new UI, but an entirely new point of view in thinking about them — in figuring out some kind of capability that is innately suited for it and that people will actually want to do. This is the main challenge, I think. Fashion comes later.

  • Andrew F

    Thinking along the lines of wearable’s relationship with the smartphone, I think one of the criteria for making a good wearable product is gonna be in embracing the smartphone as the one indispensable element in our digital lives. Nothing is threatening to usurp it anytime soon. I think one of the selling points of the proverbial iWear category is gonna be in how beautifully they integrate with its iOS siblings — using BLE, I think it’ll replicate the magical experience of multitouch back in 2007.

    As Jobs talked about during the original iPhone keynote, breakthrough interfaces made possible Apple’s breakthrough products. I think device-to-device communication is in its infancy, and I think this new wearable UI will make apparent innumerable use cases that we never thought possible. Why do I think Apple is heading along these lines? Just look at the evidence.

    1. iBeacons. They’re being deployed around the world and largely in silence by Apple and its partners. Why?

    2. Apple very publicly eschewed NFC for BLE, accelerating its death as a platform.

    3. Tim Cook on Touch ID: “The mobile payments area in general is one that we’ve been intrigued with and that was one of the thoughts behind Touch ID, and but we’re not limiting ourselves just to that…”

    4. Jony Ive’s most recent public utterance, made the same week as Kane’s Apple book pronouncing its death spiral: “We are at the beginning of a remarkable time, when a remarkable number of products will be developed. When you think about technology and what it has enabled us to do so far, and what it will enable us to do in future, we’re not even close to any kind of limit. It’s still so, so new.”

    Jony Ive, lest we forget, is the man that first realized the potential of multitouch, and was the first to demo it to Steve Jobs. He doesn’t say those cryptic words lightly (or unintentionally considering the timing of the statement). I think what he says speaks to Apple’s thinking in regards to fashion as well. “A remarkable number of products”.

    I don’t think others are unable to solve the problem of making wearables useful because they’re stupid, but they’re limited in they’re thinking because their assets are limited. The android OEM’s don’t own an operating system, and Google doesn’t own a platform to any meaningful extent. Therefore their thinking is small-minded, solipsistic, and engineering-oriented. And doomed to fail.

    • aardman

      Agree. You can’t just crank out a device and say that’s it, that’s our wearable device, buy and enjoy. The utility of a wearable device depends greatly on the infrastructure already in place around it. That’s why Apple is taking sooooo long on this. But they’re not really taking so long. We all know Apple’s development cycle is long compared to its competitors.

  • Space Gorilla

    My friends and colleagues don’t have the same phone as I do though, the accessory/case market has solved that problem already. My iPad is brushed metal red, my wife’s iPhone is bejewelled, my daughter’s iPhone is black and white. And so on.

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