Despite taking a backseat to newer technology trends, wearables devices are expected to have a strong holiday season. And one of the new drivers is corporate wellness programs.
There's a plethora of new fitness devices and smartwatches debuting in time for the holiday shopping season, with major players such as Fossil introducing 40 smartwatches across its brands, Samsung revealing the Gear S3, Fitbit updating its lineup with the Charge 2 and the Flex 2, and of course the Apple Watch Series 2.
The range of new products shows that the wearables category, for both fitness bands and smartwatches, is going strong. Earlier in the year, there were reports of slow sales prior to the newest Apple Watch release, which came out 17 months after the original device debuted and impacted renewed interest in the market. But a new report from Canalys shows that the smartwatch market has grown 60% in the third quarter of 2016, with Apple shipping 2.8 million units, Samsung shipping more than 1.1 million units and Fitbit shipping 1 million units, making it the third-largest smartwatch vendor.
Since the new Apple Watch only began accepting pre-orders on September 9 and arriving in stores on September 16, there should be a huge jump in Apple Watch sales for the final quarter of 2016.
"Apple does have that effect. It grabs people's attention and keeps it there for a while," said Ramon Llamas, research manager for wearables and mobile phones for International Data Corporation (IDC).
It's important to note that the numbers from Canalys are different than from IDC, which reported last month that smartwatch shipments for the third quarter of 2016 were only 2.7 million units, down 51.6% from the same quarter in 2015, and that Apple shipped 1.1 million smartwatches during the third quarter. The IDC does not consider Fitbit a smartwatch because it does not use third-party apps. IDC's Llamas and Canalys analyst Daniel Matte said their company's policies are to not comment on numbers from competitors.
The Chinese smartwatch market grew 42% year on year, according to Canalys' report. Huawei also has new entries for the smartwatch market, with the introduction of the Huawei Watch for women in May this year, and the unisex Huawei Fit on November 3. (Huawei introduced the unisex versions of the Huawei Watch in September 2015.) Xiaomi's wearable partner Huami launched the Amazfit smartwatch in August this year.
Going untethered with a smartwatch
Regardless of the numbers, the new devices are solid contenders for business users, particularly the untethered Samsung Gear S3 which goes on sale November 18. Other worthy competitors include the already released Gear S2 and LG Watch Urbane 2nd Edition, which are the only two smartwatches that work as standalone devices with cellular service.
Cellular service on a smartwatch is a great addition, but Llamas pointed out that new apps are needed. "Just because you have cellular connectivity doesn't mean a thousand flowers bloom when you hit the switch. We need to see a lot of applications that leverage this always connected status that your watch now has. How do we do mobile payments on a watch, location and navigation on a watch, and social networking on a watch and other applications? For the magic to happen we need to see a lot more apps."
Dan Ledger, founder of Path Collaborative, a research, consulting and advisory firm that focuses on connected health, wearable technology, IoT and machine intelligence, said embedded SIM is another development that is quietly happening. "Today if you want cellular connection you use a SIM card. They're smaller, but when it comes to smartwatches, they're still pretty big. The industry is transitioning to put the SIM information on an actual chip that's embedded in the smartwatch. You no longer have to support a removable SIM card. The Samsung Gear S2 is the first device on the market to use this embedded SIM technology. In the next year or two, we'll see more devices that have cellular capabilities and a similar form factor."
The addition of cellular capabilities and more attractive design options will help the wearables market grow.
The evolution of the market
"Prior to 2014, people were kicking the tires on this market and saying, 'Is this just a fad or is it something more'?" Llamas said.
The newest wearables aren't quite like the devices of yesteryear, or as the case may be, 2014. These new smartwatches and fitness bands are sleeker and more fashionable than the first devices that came onto the market just a few years ago. Those devices were often larger than women and some men preferred to wear.
SEE: Photos: The trendiest smartwatches and fitness bands for 2016 holiday season (TechRepublic)
"I think overall for 2016 there's been a terrific emphasis on design and aesthetics and that's carrying us into the holiday season," Llamas said. "I bring this up because the first wearable device that started rolling out was designed by a male engineer, manufactured by a male engineer, tested by a male engineer, and you can see what those first devices looked like. They were rather clunky, very first generation, but we had to accept them warts and all. When you wear a wearable device it's an expression of its owner. We want to see a device with more aesthetics. Look at 2016 and the models that came out. Nobody wants to trade form for function."
Fitbit has always been more aesthetically aware in its design choices, partnering with Tory Burch and Public School to create more fashion-forward styles. Fitbit has started working with Kohl's for a Simply Vera Wang collection of device accessories. Those accessories arrive in Kohl's stores this month.
"We have two special edition SKU's of the Charge 2 in lavender rose gold and gunmetal black, and two groups of accessories," said Michael Polin, senior product marketing manager at Fitbit. He said the Fitbit Flex 2 will "bring new people into the Fitbit family," particularly because of its water-resistant qualities, a first for Fitbit.
Fossil's re-entry into wearables
Fossil opted out of the wearables market in the past, according to Bill Geiser, who headed Fossil's watch technology division from 2004 through 2011. During his time at Fossil, Geiser oversaw the design of what he calls the first modern smartwatch, which Fossil designed and sold under the Sony Ericsson brand. It was the MBW-100, with MBW standing for Mobile Bluetooth Watch. It was released in 2006. Fossil used the same platform to create the MBW-150 and MBW-200 over the next two years.
"In 2011, Fossil decided the smartwatch wasn't really on their strategic roadmap. That was when the assets of that business were acquired by myself and a few other investors out of Finland," Geiser said.
Geiser bought the smartwatch portion of the business from Fossil and used the technology to create Meta Watch, which came out in September 2011. Geiser left Meta Watch in June 2015, and joined HP, where he's currently general manager of consumer wearables.
It took Fossil's $260 million purchase of Misfit in 2015 to give the company the opportunity to re-enter the wearables space. Misfit remains a standalone brand, but Fossil is using the Misfit platform across all of its brands, said Greg McKelvey, chief strategy and digital officer, Fossil Group.
Fossil has introduced 40 new smartwatch hybrids across its brands including Emporio Armani, Kate Spade New York, Michael Kors, Diesel, and Chaps. These watches look like traditional analog watches, but they monitor sleep, count steps, and push notifications.
"We've spent the last ten months after we made the Misfit acquisition positioning us for what is an unprecedented launch in smartwatches and wearables with a fashion-forward feel," McKelvey said.
This was the right time for Fossil to re-enter the wearables market because, "it was only until recently that technology got small enough that we could make it beautiful to put design products around people's wrists. The category just recently developed. It wasn't until the last 18-24 months that the category really exploded," McKelvey said.
Growth in the enterprise market
One of the biggest growth areas is the enterprise market, with corporate wellness programs and healthcare accounts, McKelvey said.
"With Misfit we've got enterprise accounts and healthcare accounts. We see a huge growth opportunity. We've already doubled distribution with CE [consumer electronics] and we're already in the enterprise channel. We expect in the near future for that to grow significantly," he said.
The enterprise market is a key customer for Fitbit, said Amy McDonough, vice president of corporate wellness for Fitbit.
"Really in those very early days we were hearing from employers who said, 'I want to buy a hundred of these or a thousand of these for my employees. They were really struggling with having effective and engaging wellness programs. They weren't getting strong participation. Average participation in a wellness program is 20%, and they were kind of stuck there," McDonough said.
In 2015, Fitbit began working with Target on a corporate wellness program where Target provided free or discounted fitness trackers to 330,000 employees, including part-time staff. Fitbit also has partnered with Virgin Pulse and its more than 2,200 corporate clients around the globe [including CBS Interactive, parent company of TechRepublic]. The employees at the companies that use Virgin Pulse are offered discounts on Fitbit devices.
Through the Fitbit platform, companies can look at the aggregated data from the devices, with the permission of employees, to look at trends and figure out how to build a better program.
"We're sharing a subset of data, we're not sharing heart rate or weight or things like that. But we are sharing things that can make the program more effective—steps, sleep, etc.," McDonough said.
"If people aren't walking as much in winter as in the summer, they might say, 'so maybe we need a crossfit trainer for the winter. Or maybe in summer in Atlanta it's too hot so we need to offer something else'," she said.
Specific industries might see changes in employees' health data from wearables during tax season, or during the fourth quarter in retail, she said.
Through Fitbit's work with more than 1,000 companies in 2015 alone, including more than 70 companies in the Fortune 500, it's in a unique position to assess the trends of wearables in the enterprise.
SEE: Activity trackers put to the test: Do they make you healthier? (CBS News)
Productivity matters, too. "I do think that the productivity aspects of the calendar and text notification and voice calls generate strong interest from employers. Keeping people effective and engaged at the office. You're also seeing employers showing strong interest in access to more data to give them other indicators of their [employees'] health. Heart rate and resting heart rate—that's a personal metric ... It's a really strong indicator of health and more easily impacted than weight. You might not see your pounds go down in a month on the scale, but you might be able to impact your heart rate a couple of beats," McDonough said.
Samsung works with Virgin Pulse for its own corporate wellness program and with other companies that include Samsung's devices among those its employees can use as part of a corporate wellness program, said David Rhew, M.D., chief medical officer and head of healthcare and fitness at Samsung.
"We are going beyond simply steps. We are looking at sleep, diet/nutrition, and really trying to focus on multiple aspects including proximity awareness. There's a lot of things we're exploring today. We really need to think of these devices as more than pedometers. There are so many elements here to capture information and presenting back [that information] to people in a timely manner," Rhew said.
"At Samsung we've created a couple of different hubs. One is called Gear Hub, and it allows us to be able to create applications for different business purposes. We see three major categories: one is health and wellness, another is operations logistics, and third is safety and security. With each one of these we've been developing with Virgin Pulse a series of populations that can address each one of those," Rhew said.
Samsung is talking to companies about doing sleep assessments of their fleet truck drivers, he said. "There's a very strong interest to know how many hours of sleep they are getting or if they are dozing off at the wheel. Corporations are starting to get a greater interest in not just sleep, but quality of sleep and stress throughout the day. Stress, sleep, and a whole series of other types of things are part of what we're recognizing as absolutely essential for the workforce," Rhew said.
Llamas said, "I think corporations are sensing the benefits that wearables can bring. Number one is a healthier workforce, second is low absenteeism and third is greater productivity. They realize there's also a savings cost that can be realized here. One report claimed companies that brought fitness trackers to their workforce were rewarded with 7% in healthcare expense savings. Seven percent is a small number, but if you're a multi-million or multi-billion dollar company, that's a lot of money to be had. So consider that piece. I mean, why do you think Apple also mentioned that they were partnering with Aetna to get watches?"
Apple and Aetna announced an mHealth partnership in September with Apple providing smartwatches to employees and some member populations. ABI Research recently reported that 44 million wearables will be used through corporate wellness programs in the next five years.
Holiday sales ahead
The smartwatch and fitness wearables market typically sees its greatest sales during the holiday shopping season. Geiser said that Fossil reported on an earnings call last week that 45% of its annual sales are during the period from Thanksgiving to Christmas. With that in mind, this year could shape up to be one of the biggest for wearable manufacturers.
However, cost is always a factor, Llamas said, with that coming up constantly in surveys as the number one thing that matters most to consumers choosing in a wearable device.
"With that in mind, holy cow, there are deals to be had as we head into the holidays. Just because everybody's eyes are drawn to the latest and greatest, there are great savings to be had on the ones that are slightly older, that are from at least the first half of the year. If you're going to be very price conscious, take a look at yesteryear's models, because there is some money to be saved over there," Llamas said.
The top 3 takeaways for TechRepublic readers
- Major wearable and smartwatch manufacturers are paying more attention to aesthetics and offering a wider range of devices to appeal to men and women.
- The overall impression from analysts is that the holiday season will be a strong one for wearable devices.
- Corporate wellness programs might offer discounts on wearable devices to encourage employees to participate. Aggregated data from employees' wearables can be collected to create a healthier workforce.
- Apple Watch still dominates the smartwatch market, but challenges lie ahead (ZDNet)
- Smartwatch sales to hit $17.8 billion in 2020, but business use lagging (TechRepublic)
- Apple Watch Series 2: New features (ZDNet)
- Best fitness trackers of 2016 (CNET)
- Best smartwatches of 2016 (CNET)
- BYOD, IoT and wearables thriving in the enterprise (Tech Pro Research)
- How to back up and restore your Apple Watch (TechRepublic)