Wearable tech might be maturing as a category, but it’s not yet ready for prime time.
Fitbit’s move last week toward an initial public offering showed that the firm is growing both quickly and profitably. The company sold nearly 11 million devices last year, bringing in $745.4 million in revenues and turning a $132 million profit.
But more needs to be done before the mass market is comfortable wearing technology. And wearables have yet to prove they provide more than additional data streams for already overloaded consumers.
Fitbit might be making money, but it’s also squaring off against an extremely well-funded and high-profile competitor.
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The Apple Watch just launched last month, but it is already seen as the gold standard — both figuratively and literally — in the growing area.
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Still, the Apple Watch is out of reach for most consumers, physically and from a price-point perspective. Pre-orders of select styles began shipping the end of April and the device will hit stores next month, although the price still makes the watch a splurge to most consumers. The aluminum and fluoroelastomer Sport styles start at $349 with luxe Edition versions comprised of 18-karat gold topping out at $17,000.
The main Apple Watch collection ranges from $549 to nearly $1,100 — which is still about five times more than Fitbit’s midtier product, which retails for $99 for Fitbit Flex and $129 for a Fitbit Charge.
Fitbit might be going for the mass market in wearables, but Apple brings greater branding power.
“If anyone can get this generic consumer interest in the market it would be Apple,” said John Bowden, a managing partner at Coalition Ventures.
The gold Apple watch acts like a halo over the brand’s other offerings. “Louis Vuitton has $40,000 dresses but no one ever buys them,” Bowden said. “But when [a consumer] buys a $200 umbrella, you’re buying into the brand.”
He likened this to the majority of shoppers buying the $349 Sport version, noting that Apple will probably only sell a few thousand gold Edition watches.
Bowden said wearable companies still have their work cut out for them in terms of mass consumer adoption.
“What’s missing for Fitbit, Jawbone and the Apple Watch is that you have this data, but what are actionable things you can do with that information? Having data is one step away from it being valuable,” Bowden said.
Even though he speculated that Jawbone owns about half of the wearable market, Bowden said the devices would become more compelling once they can actually start to make improvements in one’s life. This is not just telling you how many steps you took or what your heart rate is.
Fitbit and Jawbone have appeared to be neck-in-neck for the past few years — offering similar products and prices for activity trackers that monitor sleep, movement and heart rates.
Jawbone is more diversified, though, and wearables make up just half of the company’s revenues, which also include a multi-hundred million dollar Bluetooth speaker business.
Jawbone has raised over $500 million to date since its inception 15 years ago and Fitbit just $66 million — the former having put considerable capital behind software investments, according to Bowden. He expects Fitbit to follow suit after its IPO, because if anything can make these devices actionable, it’s improvements in software.