For the first time, the worldwide smartwatch market saw a year-over-year decline of 32%, according to preliminary data from the International Data Corporation(IDC) Worldwide Quarterly Wearable Device Tracker. Smartwatch vendors shipped 3.5 million units in the second quarter of 2016, which was down substantially from the 5.1 million shipped a year ago.
Senior research analyst for IDC Mobile Device Trackers says, “Consumers have held off on smartwatch purchases since early 2016 in anticipation of a hardware refresh, and improvements in WatchOS are not expected until later this year, effectively stalling existing Apple Watch sales.”
The traditional watchmaker brands are perhaps the biggest omissions in the smartwatch market among the leading vendors.
Research manager for IDC’s Wearables team, Ramon T. Llamas, says, “To date, only a small handful of traditional watchmaker brands have entered the smartwatch market, trailing far behind their technology brand counterparts.”
Despite a down quarter, Apple remains the market leader in smartwatches. Apple faces the same challenges as other OEMs, but the pure exposure of the device and brand through tactical marketing gives it a leg up on the competition. Watch 2.0, along with updates to watchOS, could help drive existing user refresh and more importantly, a new wave of first-time buyers.
“What will bear close observation is how the smartwatch market evolves from here,” adds Llamas. “Continued platform development, cellular connectivity, and an increasing number of applications all point to a smartwatch market that will be constantly changing. These will appeal to a broader market, ultimately leading to a growing market.”
Samsung, the Korean vendor, has done well with distribution. In particular, the Gear S2 lineup is off to a great start as Samsung has successfully de-coupled the smartwatch from the smartphone. Focusing on the telco channel to drive future success in telco-driven markets is likely to remain the core strategy for Samsung moving forward.
Lenovo, the Motorola brand, continues to be the smartwatch of choice for those interested in Android Wear-based circular displays. Moto’s recent attempt to branch out to the fitness market with the Moto 360 Sport have been met with mixed results as the device still lacks some of the benefits of fitness-first devices from the likes of Fitbit, Garmin, or others.
From LG Electronics, the Watch Urbane recently introduced a new SKU supporting LTE connectivity. Like Samsung, LG’s growing presence in the US telco channel has proven beneficial as the operators seek new revenue streams. Though LG is first to offer an LTE-enabled Android Wear watch, the lack of complete support from Google – Android Wear 2.0 is set to launch later this year with support for LTE – stifles the device’s aspirations.
Garmin, rounding out the top 5, has almost doubled its share since last year due to the introduction of new smartwatches like the Fenix 3. Though the number of apps and Connect IQ-enabled devices have grown in number over the past year, they still remain relatively small and cater to a niche audience – athletes.
IDC does expect to see the market return to growth in 2017 driven by the aforementioned market developments. Exactly when that rebound happens will depend heavily on when vendors drive a better use case.