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Wearable Tech Looking Worse for Wear

By Dan Gallagher

Dec 12, 2016

Making a computer that fits on the wrist may turn out to be easier than convincing people to actually wear it.

At least, such seems the current state of the market for so-called wearable technology. It is a broad categorization for a business that today is comprised mostly of wrist-based devices. These range from basic fitness bands to smartwatches that can take calls, send emails and surf the web—all while monitoring the user’s heart rate and footsteps.

It is also an adolescent business that is already experiencing growing pains. IDC reported Monday that global shipments of wearable devices rose only 3% year over year during the third quarter. That is the young category’s slowest growth on record, which is especially notable given that two of the biggest players in wearables— Fitbit and Apple—launched new devices during the period.

Fitbit, which makes a range of fitness bands as well as a smartwatch called the Blaze, reported its slowest growth on record for the third quarter last month. Its outlook was even more disappointing, with the company projecting low single-digit sales growth for the fourth quarter as it cited a “softening in demand.”

And Apple, which effectively doubled the smartwatch market with its launch of the Apple Watch last year, also seems to be in a downtick. The company doesn’t disclose watch sales, but its “other products” segment that includes the smartwatch saw revenue fall 22% year over year during the September quarter. Toni Sacconaghi of Bernstein estimates that Apple Watch unit sales fell 29% to less than 2.4 million devices for the period.

That leaves investors with the question of whether the wearables business is simply taking a breather—or already tapped out. The market is indeed young. But the fact that sales are slowing across device categories and price points suggests that wearable tech is struggling to appeal beyond a core segment of tech and fitness enthusiasts. It is worth noting that Xiaomi, which sells fitness bands for as little as $25, saw sales grow just 4% in the third quarter, according to IDC’s estimate.

And smaller players are already getting squeezed out. Lenovo says it isn’t planning to update its Moto 360, having told the Verge last week that it doesn’t see “enough pull in the market” for a new smartwatch. And Pebble, which launched one of the first smartwatches three years ago, is now reportedly selling its assets to Fitbit for an undisclosed sum.

This doesn’t mean wearable tech won’t enjoy a bump in year-end sales. In an email to Reuters Monday, Apple Chief Executive Tim Cook said sales to end-consumers of the Apple Watch hit a record high in the first week of holiday shopping. And fewer competitors in the market will help those who stay in. But from a mass-market perspective, wearable tech still faces the problem of consumers not feeling a strong need to suit up.

Write to Dan Gallagher at dan.gallagher@wsj.com

Source: Wall Street Journal

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