Fit for the Pandemic

Healthy outlook for wearables as people focus on fitness and well-being

Demand for smart wearable devices, that is, smartwatches and fitness trackers, remained robust during the pandemic, and partially thanks to it. In 2020, shipments grew an impressive 22%, with 193 million units sold, making it a market of almost $24 billion.

The explanation for this growth is intuitive: when many people were confined to their homes for prolonged periods and exercise became a highlight of their daily routine, well-being, fitness and activity tracking became a priority. Exercise and activity regimes moved outdoors, making a smartwatch or a fitness band that tracks steps, distance, heart rate and other activity metrics more attractive than ever for lots of people.

Smartwatches from brands such as Apple, Samsung, Garmin, Fitbit and Amazfit were the preferred choice for 60% of those who splashed out on a new wearable in 2020, while 40% went for the simpler and cheaper alternative offered by a fitness band.

We forecast this trend to continue in 2021 and beyond. We project sales growth of 24% in 2021 to 239 million units worldwide, and we expect 1.2 billion devices to be in use by the end of 2025, with yearly sales approaching 400 million units in the year.

However, the market dynamics will have to change for uptake to materialize. To date, growth has been fuelled by the seemingly unstoppable success of the Apple Watch, but we’re betting the next wave of strong growth will be boosted by tapping into the huge number of Android smartphone owners who haven’t been tempted by wearable tech so far. This process is already underway, and despite Apple’s strong volume growth, its market share is estimated to have shrunk from 55% of smartwatch sales in 2019 (when kids’ smartwatches are excluded) to 47% in 2020.

Google has been eyeing up the smartwatch opportunity for some time. However, its approach to date has not been very successful, with its Wear OS operating system accounting for a meagre 3% of smartwatch sales in 2020. Google will be hoping its acquisition of Fitbit will change its fortunes to prevent rivals from running away with the prize.

A segment that struggled in 2020 but is expected to bounce back in 2021 is smartwatches for kids. In 2020, there was little incentive to make a purchase while schools were closed and kids were stuck at home during the pandemic, but we expect 28 million devices will be sold in 2021, representing growth of 32% year-on-year. However, with over 90% of sales coming from China, smartwatches for kids can’t be viewed as a global phenomenon just yet.

One opportunity that has still failed to take clear shape in many markets is cellular-enabled smartwatches. These premium devices are an attractive product for manufacturers, as well as mobile operators keen to get more gadgets connected to their networks. But marketeers still have a lot of work ahead to explain the true benefit of owning a cellular-enabled smartwatch. That said, we expect a big push in this area in the next few years focussing on outdoor fitness and exercise, as these are times when users may not want to take their smartphone with them.

Reflecting this optimism, we project that of all the 258 million smartwatches that will be sold in 2025, about 40% will feature cellular connectivity, some targeted at kids, and others at the wider population of wearable tech users.

A summary of CCS Insight’s new forecast is presented below. Subscribers can access the full report here.