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Market Analysis - Trends & Outlook

Wearable
Technology Market
By
Preethi Myla Vaikuntaraman
Wearable Devices - Types and
Categories
Wearable devices come in many forms and have varied application
!
Wearable devices are clothing or accessories that incorporate advanced electronic
technologies (circuitry, wireless connectivity etc)
!
Wearable devices are worn by the user for extended periods of time and the
devices signicantly enhance user experience
!
A plethora of such devices exist - from smart rings acting as an extension of your
smartphone to devices that monitor blood glucose levels and heads-up displays
employing holographic optics
Healthcare and fitness category of wearables currently dominate the market
!
In this report, we classify wearables into four categories
1
based on their application
and use. The four categories are:
Fitness
and Wellness
includes sports and
activity monitors such as
Nike+Fuelband, Lark
sleep sensors etc.
Infotainment
includes smart watches
(Pebble), smart glasses
(Vuzix), wearable
imaging devices
(GoPro) etc.
Healthcare
includes ECG/
continuous glucose
monitoring (Medtronic,
Cardionet), wearable
patches (Proteus
sensor)
Industrial/
Military
includes smart clothing
(Zephyr Bioharness),
HUDs
1 Based on IMS research category
Wearable Devices - Current Market
and Forecasts
Fitness and activity monitors have seen high consumer adoption in 2012
!
According to various estimates, the highest revenue generating products sold in 2012
were wrist wear (tness and activity monitors accounting for anywhere between
60%-90% market share) and continuos glucose monitors (wearable medical devices).
!
Such devices have seen high consumer adoption, which is expected to pave the way
for increased awareness and adoption of other wearable infotainment devices such as
smart watches and glasses





Consumer Interests in Wearable Device types
Tech-Sensitive Textiles And Clothing
Headset/Eyeglasses
Sensor-Enabled Wristwear
Medical Devices That Transmit Data
0% 10% 20% 30% 40%
Source: BII Report, April 2013
Estimated Market Share for
wearable devices, 2012
Other
25%
Medical Devies
15%
Fitness Devices
60%
Source: BII, IMS and media articles
Competitive landscape within the different categories
Source: IHS World market for wearable technology - 2012,2013
There are more crowd funded projects for smart watches than big companies
!
The Fitness market (estimated to be $2-$3 billion) dominated by players such as Nike, Adidas,
FitBit, Jawbone etc have led the charge in wearable devices and brought it to the mainstream
market
!
However, the entry of big-name brands such as Google, Apple and Samsung has lent credibility
to the industry and increased awareness of wearable devices of the infotainment sector among
mainstream consumers
!
But still, the market is currently dominated by startups borne out of online crowd-funding
campaigns such as kickstarter and indiegogo
Expected to enter the market
Apple iWatch
Google Smartwatch
Microsoft Smartwatch
LG G Watch
Acer
ZTE
Nissan
Uncertainty in the future of the wearable technology market
!
While many high-level mobile execs expect
wearable devices to play a signicant role in
2014, forecasts for the wearable tech industry
varies widely
!
Forecasts vary from 64mn devices shipped in
2017 (by Berg Insight) to 485mn in 2018 by ABI
research.
!
The wide variation is attributed to the differing
expectations on the adoption of wearable
devices by mainstream consumers
!
IMS research forecasted the market size under
three scenarios (based on adoption rate) that
vary from 40mn to 171 mn devices shipped
!
Many researchers expect tness and medical
wearable devices to have the highest market
share; BI projects 80% market share of Activity
monitors (tness and medical) in 2017
Source: IHS Inc. September 2013
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Key Drivers for Wearable Device
Adoption in the Infotainment Market
Wearable devices are as much a fashion choice as a functional one
!
A wearable device is a highly visible part of a user and a lot more personal than smartphones or PCs. Hence,
two characteristics that usually do not feature in the decision making process for other tech products, play a
signicant role here
!
Fashionability
!
Uniqueness
!
A dress or jewelry conveys something about the wearer, similarly the usage of any wearable device sends a
message about the user.
!
Mainstream adoption of wearables in the consumer market depends on wearable devices achieving the above
two qualities
The recently unveiled
galaxy gear smart watch
was criticized for being
too bulky and
unappealing to women
The stylish and
minimalist Shine
tness tracker
Price remains a key barrier for mainstream adoption of wearable devices
!
One of the biggest roadblocks for widespread consumer adoption of wearable devices is the price of the current
devices. The average price of smart watches currently available for sale or pre-order in the market is $245, while
the Vuzik smart glasses cost $999
!
55% of respondents in a survey conducted by TNS market research say that wearable devices are too expensive
!
Survey conducted by GfK noted a signicant drop in purchase intent among users after they learnt the price of
current wearable devices (note graph below)
!
With more players in the market and lower priced products, the adoption of wearable devices as a mainstream
consumer product is expected to increase
Change in purchase intent of young consumers
after learning current price of product
0%
10%
20%
30%
40%
SmartWatch SmartGlass
Before knowing price After knowing price
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Stand-Alone wearable devices have a potentially larger market
!
Under the current scenario, growth of the wearable tech market is limited by the level of
penetration of smartphones. Almost all mainstream wearable devices now are paired with
smartphones (most tness devices and many smartwatches)
!
Smartphone penetration is more than 50% in the developed countries whereas it is less than
20% in some of the large developing markets (such as India, Philippines and Thailand etc)
!
Increasingly, wearable devices will evolve as a stand-alone device and hence its potential
market and adoption will see signicant growth in the future
Complement to Smartphone Stand-Alone Device
The overlapping market of smart watches and fitness devices
!
Fitness devices track distance traveled, how long you
have been inactive, sleep time and sometimes heart rate.
Certain devices such as Nike and Basis bracelets also
display time.
!
These functions can also be performed by a smart watch
loaded with sensors, while being paired to a smartphone
to receive and make calls. Through an app ecosystem, a
smart watch is capable of acting as a tness device and
more
!
This suggests, the smart watch market has the potential
to encompass the tness devices market as well. How
this plays out in the industry, remains to be seen.
Wearable devices will have a higher adoption among younger demographic
!
The current user segment for wearable devices comprise of sport or tness enthusiasts and early tech
adopters
!
Within mainstream consumers, there are certain segments that are more inclined to wearable devices. In
the initial stages, companies should target these segments to increase mainstream adoption of wearables
!
Teenagers are potentially a great market for early stage wearable devices. This consumer segment wants
to be always on and connected and wearable devices would add to the cool quotient - teenagers
fashion choice
!
Survey by GfK market research rm found that consumers aged 16 to 24 liked the idea of connected
devices (watches and glasses)
Interest among 16-24 year olds for connected watch
and eyewear
SmartWatch
Google Glass
0% 15% 30% 45% 60%
Privacy is a major concern for consumers, impacting wearables adoption
!
With the recent NSA revelations, privacy concerns are at the top of
mind for consumers regarding technology
!
An in-depth study conducted by Rackspace and Centre for creative
and social technology showed that privacy concerns were the major
roadblock for adoption
!
dont want to adopt wearable technologies because of privacy
concerns - More than half the respondents
!
Google Glass and other wearable devices should be regulated -
Two-thirds of the research participants
!
Prefer these devices to be banned completely - 20% of respondents
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