The wearables segment has gained maturity over the past few years, leading to a significant uptake of the technology. Several companies have entered the segment with new products while the incumbents have improved the designs of their existing devices. The segment, which at its nascent stage was seen as an offshoot of the smartphone market, has now claimed an independent existence. However, smartphones continue to be the major channel for wearables usage.
According to the International Data Corporation (IDC), a total of 102.4 million units of wearable devices were shipped in 2016 globally. The upward growth trajectory of wearables continued in the first half of 2017 as worldwide shipments grew by about 18 per cent from 20.9 million units during the quarter ended March 2016 to 24.7 million units during the quarter ended March 2017.
The popularity of wearables has increased significantly as they provide a seamless and mostly hands-free experience of electronic gadgets. They have the ability to perform usual and even advanced computing tasks as well as complex sensory and scanning tasks as they are connected to the body. Connectivity typically is through Bluetooth and Wi-Fi, but cellular connectivity is steadily gaining traction as consumer choices swing towards independent wearables. In addition, they can interact with other devices and transmit data.
Applications
Wearables find use cases across several segments. Although the demand continues to be dominated by fitness trackers and smart watches, wearables are breaking the mould and are being adopted for varied purposes. For the first time, in 2016, ear-worn devices and sensor-laden clothing comprised 1 per cent of the total quarterly shipments.
Most of the wearable devices have been launched in the healthcare space. Wearable manufacturers have identified and catered to the need for accurate data collection to anticipate and prevent diseases. Wearables in this segment are aimed at improving the quality as well as the quantity of monitoring to better equip patients and doctors in making timely and prudent decisions.
From detecting fever and glucose levels to enabling people with neurological and musculoskeletal injuries regain mobility, the healthcare sector holds immense potential for the wearables segment. Some smart watches have been launched with multiple physiological and environmental sensors that can measure signals such as electrocardiogram, electrodermal activity and inertial movements. Wearables have also been designed to provide 100 per cent drug-free pain relief and help detect unusual events such as seizures in epilepsy patients.
Wearables are being used to make digital payments, thus avoiding the need to carry debit/credit cards or even cash. These payment systems are faster, more secure and less prone to being misplaced or stolen as they can be protected through biometric authentication. Some notable examples of such payment systems that are being facilitated through near-field communication are Apple Pay and Samsung Pay.
Wearables such as the Google Glass have enhanced the experience of interactive learning. Their use can be extended to training fresh recruits. Through wearables, companies can revolutionise the training process. Field employees can share problems through video and get more qualified technical help virtually. Going forward, wearables can also be used for real-time collection of evidence in criminal cases. For example, smart eyewear could be used to record crime scenes, or how an arrest is carried out, which would be automatically stored as evidence in the central database over the cloud. This would not only ensure transparency, but also prevent misbehaviour of both parties.
Uptake in India
The Indian wearables market, while still in its infancy, with applications skewed towards health and fitness, is witnessing deeper penetration and increased volumes. According to IDC, the Indian market recorded shipments of 2.5 million units in 2016. Further, a total of 612,000 units were shipped in the quarter ended March 2017, a year-on-year growth of 53 per cent over the 400,000 shipments in March 2016.
The Indian market continues to be dominated by basic wearables that do not support third-party applications. Smart bands currently account for around 90 per cent of all wearables shipped. Most of the demand still lies in the entry-level segment (below Rs 3,000), which accounted for approximately 78.6 per cent of the total wearables shipped to India in the first quarter of 2017. However, even in the entry-level segment, manufacturers are providing augmented features such as monitoring of heart rate and sleep patterns.
GOQii, Xiaomi and Fitbit are the major players in the Indian wearables segment. As per IDC, GOQii had the highest market share of 20.8 per cent in the quarter ended March 2017, up from 15.5 per cent in the quarter ended December 2016. Its shipments increased by 21 per cent on a quarter-on-quarter basis, owing to the introduction of new products and bundled offers. The company is slowly gravitating from a purely online to a hybrid channel of distribution.
Xiaomi held the second position with a market share of 10.1 per cent during the quarter ended March 2017, down from 13.2 per cent during the quarter ended December 2016. It registered a decline of 30.6 per cent in shipments due to its inability to meet the increased demand. Xiaomi was followed by Fitbit with a market share of 7.9 per cent. The company’s shipments, however, declined to 5 per cent during the quarter ended March 2017 as compared to 7.9 per cent in the quarter ended December 2016.
Meanwhile, the share of wearables sold through offline platforms is growing considerably due to the entry of players such as Titan and Fossil, which have a huge retail presence, and the migration of some purely online vendors to hybrid channels of distribution.
The popularity of wearables has increased significantly as they provide a seamless and mostly hands-free experience of electronic gadgets. They have the ability to perform usual and even advanced computing tasks as well as complex sensory and scanning tasks.
Key challenges
Wearables continue to be niche offerings and no significant advances have been made to proliferate their usage. A major challenge faced by the segment is to remain relevant throughout the day. Customers are reluctant to use ancillary devices that are dependent on a mobile phone or a Wi-Fi network for connectivity. In a survey conducted by Ericsson, 14 per cent of all users who had stopped using wearables cited the lack of stand-alone capability as the reason. Thus, there is a need to make wearable devices that are equipped with cellular connectivity and the capability to function independently.
Stand-alone capability would require a high level of sophistication in both the hardware and software of the devices. Another major hurdle is incorporating power capacity in such a small and compact device capable of tasks similar to those being performed by smartphones.
Another challenge related to wearables is that they have to be in sync with contemporary fashion trends. Hence, with mass consumerism, companies are hard pressed to focus on not only the functions of wearables but also their form, pushing technological and aesthetic boundaries. This presents an opportunity to wearables manufacturers to sell multiple devices with distinct designs.
Future outlook
In spite of the above-mentioned challenges, wearable technology is increasingly gaining popularity. Google’s continuous improvements on its Google Glass wearable and Facebook’s acquisition of virtual technology leader Oculus VR testify to the potential that wearables hold.
According to IDC, the global wearables shipments will rise to 213 million units in 2020. The Indian wearables segment too is likely to witness double-digit growth in the next few months despite the roll-out of the goods and services tax.
With most wearable devices offering almost identical features, clubbed offers on purchase have become the differentiating factor. For instance, GOQii offers access to a personal trainer along with each fitness band purchased, which has emerged as the most appreciated feature by its customers. Therefore, manufacturers can benefit by bundling services and facilities with wearables.
However, the current demand concentration in specific markets such as healthcare and fitness does not bode well for the sustained growth of the sector. Companies have to expand beyond these segments and manufacture products that are better suited for larger markets to experience sustained growth. Thus, despite the challenges, the wearables market is replete with opportunity, provided manufacturers innovate across sectors and change the perception of wearables from niche offerings to mainstream devices.
