Berg Insight: 64 million wearable technology devices by 2017. Why companies need to watch this market closely

Berg Insight forecasts that sales of smart glasses, smart watches and wearable fitness trackers will reach 64.0 million units in 2017. That’s an increase of 50.6 percent per annum from 2012, when there were just 8.3 million units shipped worldwide. mobiThinking asked Berg Insight CEO Johan Fagerberg some questions about the latest research and his opinions on the market, but before we get to the Q&A, first let’s explain what the fuss is about wearable technology and why companies need to track this market.

In a world when one smartphone looks very much like another, wearable technology is a breath of fresh air. In 1994, IBM took the radical step of merging the personal digital organizer with the mobile phone. The IBM Simon was a touch-screen organizer that could make calls and send emails. Twenty years later, virtually all smartphones still bear an uncanny resemblance – in terms of physical form factor – to the IBM Simon.

That’s why no one should be surprised at the hype and excitement around wearable technologies such as smart watches from Sony, Samsung, Pebble and Qualcomm, and smart glasses from Google. At last, we are starting to break away from the idea that a smart communication device has to be a rectangular handheld device with a big touch screen. Today many of these wearable devices are reliant on the user having a smartphone in their pocket, but that won’t always be the case.

Ironically, the concept of the smartwatch isn’t revolutionary either, and can trace its roots back to the IBM WatchPad. Back in 2000, IBM/Citizen’s Linux-powered smartwatch could perform basic PDA-type functions and used Bluetooth to communicate with/control the user’s cell phone or PC. But the world wasn’t ready for smart wearables then… so why is it now?

Interestingly, the driving force behind adoption of wearables isn’t a technology company like IBM, Sony, Samsung or Google, it is Nike. In a marketing masterpiece, much saluted by peers at Cannes Lions advertising awards, the sports brand gave wearable technology its first raison d’être: fitness. Nike has introduced a Nike+ GPS SportWatch, a SportBand and a Fuelband to help people track their sporting progress with a glance at their wrist, and on completion log their results with on the Nike+ community site, which now boasts a stunning 18 million members. These activity trackers – from Nike and its mimics – account for the vast majority of today’s sales of wearable technology – but that’s going to change as smart watches start to take off and begin to absorb the functions of activity trackers, according to Berg’s predictions (see below).

You don’t have to ponder long on Nike’s success with activity trackers to see array of applications for wearables from health monitoring, navigation, travel pass, event ticketing, key fob, payment etc (as well as all the communication functions associated with smartphones).


Q&A with Johan Fagerberg, CEO, Berg Insight

Q1) How much of this wearable technology thing is hype?

It’s not hype, in our opinion. It’s an interesting and emerging product category. The potential is there, but our forecast of 64 million devices in 2017 is still moderate compared with smartphone sales, for example.

Q2) What are the key categories of wearables today? (i.e. watch, glasses, fitness band, etc)

Today wearable fitness and activity trackers constitute the vast majority of the shipments. Smart watches is the second largest category, followed by the more nascent smart glasses category.

Q3) What proportion of the market does each hold in 2013?

Activity trackers: 96 percent.
Smart watch: 3 percent.
Smart glasses: <1 percent.

Q4) What proportion of the market will each hold in 2017?

By 2017, smart watches are predicted to incorporate much of the functionality of activity trackers. Smart watches will then be the largest wearable device segment followed by activity trackers and smart glasses. It’s also important to remember that new innovation can spur completely new form factors and usage areas.
The relative market shares between smart watches, activity trackers and smart glasses are predicted to be 55 percent, 33 percent and 12 percent in 2017.

Q5) What will these devices actually do in 2017? How will people be using them? Could they end up replacing the smartphone or be extensions to the smartphone.

Today’s devices need to evolve into something more than single purpose fitness trackers or external smartphone notification centers in order to be truly successful. Wearable technology will shift from being smartphone accessories into becoming proper stand-alone computing devices. Closeness to the body and always aware capabilities will enable them to be more than merely miniaturized smartphones.
I don’t think that we can assume that people will have the same device mix in five years as we have today. Today, we have a smartphone, a tablet and a laptop. That combination will probably be around in five years as well, but other combinations will be equally common. For example, you may have a pair of smart glasses and a tablet while another person will get by with just a smart watch and a laptop.

Q6) What should companies/marketers be doing about these innovations today/by 2017? Should they be developing websites, apps, services to work with these devices?

It’s up to each company, but I think it’s important to strike a sound balance between being economical with developing resources and keeping both eyes open for new opportunities. If you’re a fitness app company, there’s more incentive to have a smart watch/fitness band app ready today, than there would be for a bank. But in 2017, it could be equally important for both, so don’t fall asleep at the wheel.

Q7) Do you see them as consumer devices or do they have a role in enterprise mobility also? In what ways should companies be viewing them as B2C, B2B and or B2E?

The objective of this report is mainly consumer-oriented, but the enterprise opportunity is great for wearables. Take smart glasses as an example: you might have a few objections about walking around with a pair of smart glasses in your everyday life, but if they could help you perform a certain task in your job better and more effective, you would probably wear them at work without hesitation.

Q8) What companies do you see developing these devices? Will the innovators still be the same as today – Nike, Google, Samsung, Sony etc?

It will be a combination. A few new companies will certainly share the stage with today’s giants. The mix of companies will also be new. Just the four you mention is quite new and unique. Samsung and Sony are consumer electronics players, Google is mainly about software and services and Nike is a sportwear vendor…

• Berg Insight report: Consumer Electronics and Wireless M2M.


mobiThinking’s take:

No one can say with certainty that smart watches, smart glasses and other wearable technologies that are being cooked up in vendor labs around the world will grab the world’s attention in the same way as the smartphone has. But they underline the point that the future of mobile is fluid and unpredictable. The only thing that is inevitable is that in the future there will be a proliferation of Internet-enabled devices in all shapes and sizes. Clearly building native applications for this new wave of devices is impracticable for the vast majority of companies, but companies should design future Web-based mobile services so they can be accessed via any device, with any interface.

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