Innovation

Smartwatch sales to hit $17.8 billion in 2020, but business use lagging

A new forecast from the IDC predicts significant smartwatch growth by 2020. This is good news for the industry after smartwatch sales dropped earlier this year.

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The new Apple Watch Series 2 will help to increase smartwatch sales in 2016 and beyond.

Image: Apple

Smartwatch shipments will increase to 20.1 million units in 2016, a 3.9% increase over the 19.4 million units shipped in 2015, and will nearly triple by 2020, reaching 54.6 million units valued at $17.8 billion, according to a new forecast from the International Data Corporation (IDC).

This is a significant increase compared to earlier this year, when the IDC released a report showing a 32% decrease in smartwatch sales in the second quarter of 2016, compared to the same period in 2015. This lull, which some called "a nuclear winter," was mostly attributed to the lack of a new Apple Watch model since it was introduced in April 2015. Apple Watch sales were down 55% during the second quarter of 2016.

Despite the optimistic prediction for smartwatch sales in the future, analysts don't have a clear idea on when they will become indispensable for the enterprise. This is because there needs to be more uses and business applications before smartwatches become more valuable to professional users in the enterprise.

SEE: Smartwatch shipments to show so-so growth in 2016, says IDC (ZDNet)

"I absolutely think it's going to take some time. There has to be some development around connectivity, especially cellular. We're doing better on the displays, we're going to have to do a lot better on the battery. For me, the magic really happens with what that user interface is going to look like and where the applications are going to complement them," said Ramon Llamas, research manager for IDC's wearables team.

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Image: IDC

"Right now, smartwatches are not must-have devices for the enterprise," Llamas said.

Dan Ledger, principal with Endeavor Partners, said, "There still isn't a killer use case for smart watches. They're still primarily, for most people, a product of convenience. At the end of the day they save you a couple of minutes of not pulling out your phone or taking out your wallet to pay for something. Fitness is one area where they play a unique role, but a lot of people still run with their phones, so it's not necessarily this new product that is solving an existing problem that has been around for a long time, and that's kind of where smartwatches will struggle. They're good at a lot of things, but it's not like you say, 'I really need one of these.'"

Smartwatches are part of the IDC's larger category of smart wearable devices, which also include smartglasses and some wristbands. The IDC categorizes smartwatches as those that can run third-party applications, such as Apple's Watch, Samsung's Gear S3, Motorola's Moto 360, and Pebble's Watch. It doesn't include the Fitbit Blaze, since it doesn't run third-party applications.

The IDC categorizes wearables that do not run third-party applications as a basic wearable device. Basic wearables can take on multiple form factors such as wristbands, clothing, and watches. Examples include Fitbit's fitness trackers, Garmin's Vivofit devices, and Xiaomi's MiBand. By the end of 2016, total shipments of basic wearables will reach 80.7 million units.

The new Apple Watch Series 2 was announced last week, and shipments start September 16, so that's been taken into account for the IDC forecast, Llamas said.

SEE: Apple Watch Series 2: New features (ZDNet)

"The hardware on the Apple Watch 2 didn't change too much, which is a good thing. But having that faster processor helps. Who doesn't like faster, after all? Combine that with what Watch OS3 has to do and you have a more seamless, intuitive experience," Llamas said.

Trying to figure out what the Apple Watch will look like in future versions helped determine the 2020 forecast, he said, adding, "that's where a lot of the fun is. The hardware will change. Maybe we will see a round watch rather than a square one. Voice based instead of a digital swipe. What will happen, for instance, when the Apple Watch has its own cellular connectivity and you don't need to connect to a smartphone anymore?"

SEE: Apple Watch Series 2 review: This time, a better smartwatch (CNET)

If additional business uses such as biometric authentication and authorization are added, it will benefit the smartwatch category in the enterprise, Llamas said.

There are some applications that are useful in a business environment. "We're seeing a bunch of applications coming down the pipeline that are making business users' lives more productive and easier. That's exactly what wearables strive to do," Llamas said, citing three of his personal favorites: Salesforce, Evernote, and BetterWorks.

He said, "we're still waiting to see what the next ones are going to be because, let's face it, right now a lot of companies out there, both users and developers, are still tinkering with 'how do we get a great experience onto your smartwatch that gives you quick, actionable information rather than a simple view?'"

Three takeaways for TechRepublic readers:

  1. Smartwatch sales are expected to recover from the sales slump earlier this year, with 3.9% growth in 2016 compared to 2015, and overall growth nearly tripling by 2020.
  2. The Apple Watch Series 2 will be a strong contender in the smartwatch market and was part of the reason for the boost in anticipated sales.
  3. Business uses for smartwatches are lagging, and until more applications and uses are developed, the smartwatch will remain a "nice to have" rather than a "must have" for the enterprise.

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About Teena Maddox

Teena Maddox is a Senior Writer at TechRepublic, covering hardware devices, IoT, smart cities and wearables. She ties together the style and substance of tech. Teena has spent 20-plus years writing business and features for publications including Peo...

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