Waning enthusiasm for full-touch smartwatches to be offset by smart analogue watches

George Jijiashvili, wearables analyst at CCS Insight

CCS Insight’s latest global forecast for smart wearable devices confirms the continued momentum of wrist-worn technology.

As with its previous forecasts, the company expects the lion’s share of sales volumes to come from fitness bands, while smartwatches remain the largest revenue contributor to the overall wearables category.

In fitness trackers, brands such as Fitbit and Xiaomi are leading the charge. CCS Insight expects that 53 million fitness trackers will be sold in 2016, with volumes reaching 165 million in 2020, at a total value of $5 billion.

Smartwatch sales will also continue to grow, with sales reaching 96 million units in 2020, but enthusiasm for full-touch smartwatches has slackened. CCS Insight expects future growth in unit sales of smartwatches to be primarily driven by smart analogue watches.

George Jijiashvili, wearables analyst at CCS Insight, commented, “The initial hype around full-touch smartwatches has subsided. Despite concerted efforts by numerous consumer electronics makers to break into the category, this type of smartwatch still feels like a compromise, a solution looking for a problem. The Apple Watch is the only product delivering meaningful volumes and even Apple is struggling to grow sales”.

Jijiashvili continued, “Our research indicates the next wave of growth will come from smart analogue watches. Compared with full-touch smartwatches, these offer the convenience of a traditional watch but with added smart functionalities such as activity and sleep monitoring, all delivered with six- to 12-month battery life”.

CCS Insight believes traditional watchmakers, which have seen sales decline over the past 18 months, are focusing efforts in this area as they try to reinvigorate the market by delivering analogue watches with a smart twist.

Cellular-enabled smartwatches are a segment CCS Insight is tracking closely. China remains the key market for this category, specifically connected products designed for children and elderly consumers. CCS Insight believes this is a trend that will also start to emerge in North America and some Western European markets in the future.

Given the unpredictability of the wearables market, CCS Insight provides its clients with scenario-based forecasts that draw on a variety of different assumptions. One scenario in cellular-enabled smartwatches sees the introduction of an Apple Watch with an embedded SIM in 2017. Such a product would be likely to remain a small subset of total sales, given its premium price and ongoing subscription charges, but it would certainly raise awareness of cellular-enabled wearables.

In the quantified-self category, which is primarily made up of fitness bands, CCS Insight expects China to remain the biggest market worldwide thanks to its large population and low-cost products.

Jijiashvili noted: “In contrast to smartwatches, fitness bands have a very clear purpose in consumers’ eyes. We expect growth on multiple fronts, be that people receiving a device as a gift, buying a fitness tracker for the first time or existing owners upgrading as designs improve and new functionality is added”.

CCS Insight also highlights that there remains a healthy market for performance sports watches. Despite only accounting for 6 percent of unit sales in the quantified-self category by 2020, they will deliver about 20% of the segment’s value.

Another category of note is wearable cameras. CCS Insight expects sales volumes to rise from 14 million in 2016 to 25 million in 2020. The forecast indicates average prices will drop about 40% between 2016 and 2020, and greater affordability will help drive broader adoption.

CCS Insight also expects a growing proportion of 360-degree capable action cameras, with these variants accounting for 15% of all wearables cameras sales by 2020.

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