Measuring Success In Wearables: It’s Thousands of Thousands

on March 25, 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?[pullquote]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?”[/pullquote]

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.