A Critical Year Ahead for Smartwatches

Smartwatch Segment Heats Up as Major Brands Join the Party

There’s a perception in some financial quarters that smartwatches and the broader smart wearable device category have failed to live up to expectations. Although this is partly true, CCS Insight’s latest wearables forecast signals that it remains a market with lots of potential. The unveiling of Fitbit’s new Ionic watch earlier this week and the expectation of new wearable devices from Garmin, Samsung and others at the upcoming IFA 2017 event provide further evidence that the wearables space still has room for growth.

These products are likely to be joined by a much-rumoured cellular-enabled Apple Watch on 12 September 2017, which will bring another dimension to Apple’s smartwatch line. As if to underline Apple’s tremendously strong performance, CCS Insight believes the device will grab more than 50 percent of a $7.9 billion smartwatch market by the end of 2017.

However, as Apple continues to dominate, the broader smartwatch market is arguably far more interesting from an analyst perspective. We believe 2017 is a critical year as major watchmakers unleash a wide range of full-touch models, many of which were announced at the Baselworld event in April 2017 (see Watch Out for Smart Timepieces and Event Report: Baselworld 2017). New products from Fossil, which licenses brands such as Michael Kors and Diesel, are now arriving in shops, and other watchmakers including Guess, Hugo Boss, Louis Vuitton, Montblanc, TAG Heuer, Movado and Tommy Hilfiger are already shipping, or will soon ship, new smartwatches.

In our view, these brands, which all use Google’s Android Wear operating system, have a far better chance of energising the smartwatch market than smartphone makers such as Asus, Motorola and Sony, all of which have effectively withdrawn. This leads us to believe that Android Wear devices will take 21 percent of the advanced full-touch market in 2017, up from 14 percent in 2016. The notable exception is Samsung, whose commitment (and volumes) of Gear-branded, Tizen-powered smartwatches has been impressive.

Traditional watchmakers will be relying on their strengths in distribution, retail and branding in the hope of cracking a nut that proved too tough for many of the biggest names in the smartphone world. However, it might not be all plain sailing. It would be wrong not to caveat our excitement at well-known watch brands coming into the market with the cautionary note that a failure of sales to live up to expectations could provide an unpleasant hangover in mid-2018. If retail channels find themselves with a mountain of unsold stock, they’ll be very nervous about making a major commitment for the next big sales opportunity in the fourth quarter of 2018 (and beyond), leaving Apple to further consolidate its lead.

We remain optimistic that this won’t be the case, and the main scenario in our forecast reflects our positive outlook. We don’t deny that there’ll be bumps in the road, but wearable technology continues to make a huge amount of sense in the always-connected world we now live in.

CCS Insight’s latest wearables forecast is published today. More details can be found here.