When consumer electronics sector was faced with challenges last year as sales of gadgets and devices declined significantly, one particular segment survived: the wearables. To be factually correct, they did quite well in the uncertain times with shipments reaching an all-time high of 746,000 units in the final quarter of 2016, according to the latest figures from International Data Corporation (IDC).
The global ICT research and consulting services firm says shipments were up 29.0 per cent year on year (Y-o-Y) in Q4 2016, spurred by new launches from leading vendors and the entrance of new players to the market.
When looking at 2016 as a whole, IDC’s data shows that shipments for the MEA region were up 52.2 per cent Y-o-Y. This was primarily driven by the strong performance of low-cost basic wearables (i.e., devices that do not support third-party applications), which grew 67.9 per cent Y-o-Y in 2016.
Need for change
The growth for smart wearable devices – devices that do support third-party applications- was not quite as spectacular, with shipments up 20.7 per cent over the same period.
“Health and fitness are the only areas currently addressed by wearable tech, and these are areas that smart and basic wearables perform equally well in,” says Nakul Dogra, a senior research analyst for personal computing, systems, and infrastructure solutions at IDC MEA.
“As such, users do not receive any incremental benefit in terms of functionality from investing the additional cost required for a smart wearable device. There is therefore a need for wearables to evolve from basic functionalities like counting steps and analyzing sleeping patterns to more complex functionalities that rely on the use of third-party apps. Such apps are clearly underutilized in the current scenario, which is limiting the growth of smart wearables.”
Fashion takes centre stage
Besides functionality, Dogra also anticipates a shift in the way wearables are bought.
“With fashion hogging much of the limelight, utility is being pushed into the shadows,” he says.
“As such, sales of wearables will increasingly be driven by fashion labels that are partnering with tech brands, a move that will help take wearables to a new audience and broaden the retail of these gadgets beyond traditional electronics stores and into fashion outlets. New product launches are expected in the clothing segment in 2017 and this will inevitably accentuate the focus on fashion within the wearables space.”
IDC expects the MEA wearables market to grow 24.1 per cent Y-o-Y in 2017 to reach a total of 2.9 million units. It also projects that the market expanding at a compound annual growth rate (CAGR) of 11.3 per cent over the 2016–2021 period.
“The wearables market is continuously evolving,” says Dogra.
“Going forward, we expect the smart watch space to become further segmented, with each brand/product catering to a niche audience – kids watches, sports watches, luxury watches, fashion watches – and addressing the particular needs of specific users in a more effective way,” he states.
“Currently, the majority of smart watches are generic in nature, with a single device trying to cater to the multiple needs of a varied set of consumers, often with poor results. This segmentation is therefore a positive move for the wearables industry, with customer satisfaction and stickiness likely to increase if these niche products are able to address their needs better.”
Not a smartphone replica
Dogra also believes that wearables vendors must look to differentiate their products from smartphones and create a compelling need for wearables within the broader ecosystem of gadgets.
“Without this differentiation, wearables will stagnate and be viewed as little more than fashion accessories for your smartphone,” he says.
“Wearables have the potential to form an integral part of the Internet of Things ecosystem, so it is imperative that vendors come up with innovative solutions that move beyond health and fitness to enable consumers to perform day-to-day tasks in an easier way” Dogra adds.