It is prime time for smartwatches

Once-expensive gimmicks are no longer a fad, but there is still plenty of market to reach.

  • By Dan Gallagher,
  • The Wall Street Journal
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Smartwatches are most certainly no longer a fad. Whether their makers can turn them into necessities is the new billion-dollar question. Many billions of dollars, in fact.

Apple (AAPL) Inc. alone is estimated to have sold $9.9 billion of its Apple Watch in 2018, according to consensus analyst estimates from Visible Alpha. Analysts see this segment rising to more than $15 billion annually for the company in the next two years. And while the iPhone maker has the largest share of the market, rivals including Fitbit (FIT), Garmin (GRMN), Huawei and Samsung (SSNHZ) all are growing their smartwatch sales as well. About 51.3 million smartwatches were sold globally in 2018, up 54% from the previous year, according to data from IDC on Tuesday.

Using a highly conservative average selling price of $300 (most models by Apple, Garmin and Samsung are priced much higher), the current smartwatch market is now valued at more than $15 billion and growing rapidly.

It has also so far avoided the rapid burnout phase that seemed to hit the precursor product category known as fitness bands. Fitbit, the largest seller of such bands, saw its annual device shipments peak in 2016—five years after the company’s first reported sales of such products. Fitbit is still smarting from that shift, as its overall device shipments slipped 9% in 2018. But the company said its smartwatch sales surged 437% for the year due to strong demand for its Versa device—a new version of which was announced on Wednesday. Smartwatches now make up 44% of Fitbit’s total revenue.

It seems that the smartwatch market has much more room to expand. Smartphones, to which most smartwatches pair to provide services such as message alerts, sell more than 1.4 billion devices a year. But for smartwatches to become necessary devices for such a wide base of users, prices will need to moderate. Apple, which accounts for well over 40% of the smartwatch market, had an average selling price of about $438 last year for the Apple Watch and currently markets 11 versions priced at more than $1,000.

More health-related functions also will help. Some smartwatch makers are even working with health-care providers on programs that could sponsor the sale of devices and related services. A large slice of the public still needs convincing, though. A survey by UBS late last year found 52% of smartphone users saying they are unlikely to purchase a smartwatch. Fortunately, even that still leaves plenty of room for the market to tick upward.

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