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The Watches Might Be Smart, But The Sales Not So Much

 4 min read / 

A few years back, The Change Function, a book written by Pip Coburn, which gave a solid framework to evaluate the probability of successful adoption of new technology. It involves asking two simple questions:

  1. Is there a crisis people are looking to solve?
  2. What is the perceived pain of adoption?

This is an attempt to evaluate the smartwatch using the change function, albeit retrospectively.

When it comes to cellphones, the late 90s and the early 2000s bore witness to dwindling sizes. As the mobile phone metamorphosed into the present day smartphones, their functionality increased manifold warranting a larger screen size in the process. All along, people gradually rid themselves of the habit of wearing a watch.

Enter The Wearables

As the then burgeoning smartphone industry later experienced weak growth, the companies started entertaining the idea of creating a new category – that of wearables. The catastrophe of Google Glass notwithstanding, smartwatches seemed like a natural choice.

In that sense, it was from the start a solution looking for a problem thus answering the first part of the change function – there was no crisis, to begin with. The absence of a crisis precludes the necessity to adopt, rendering the second question moot.

In simple words, the smartwatch was never going to emulate its host, the smartphone. This was further evidenced by a 32% 2Q16 drop in worldwide smartwatch shipments, the bulk of which was contributed by a 55% drop in Apple Watch sales – the Apple Watch has a 47% market share.

Common points of contention on smartwatches:

  • Too costly – These devices pack incredibly complex circuitry in a very compact space. For the fab houses to bring down manufacturing costs, they need to produce more. A commensurate demand to justify an increase in production is conspicuously lacking, creating a Catch-22 situation
  • Should be a standalone device – Smartwatches are currently not capable of functioning efficiently in the absence of a paired smartphone. When it comes to functionality, the former is dwarfed by the latter leading to doubts over its efficacy as a standalone device, especially when the smartphones accompany users almost everywhere
  • Fitness device – The only real application that a smartwatch is left with is that of a fitness tracker. Fitness tracking has indeed become a craze lately. However, unless one is a professional athlete, the odds are that one is satisfied with logging the rudimentary events like steps taken, flights climbed, distance walked and so on. A good smartphone is already capable of tracking these and much more. The more advanced metrics that a smartwatch could potentially measure would only make it a glorified fitness tracker with a very little mass market appeal.

Since the advent of the smartphone, a larger screen size has been the name of the game. Given how much heat Apple took for the small 3.5-inch screen size up until the iPhone 4S, it is highly unlikely the 1.5-inch real estate of a smartwatch screen is going to sate customers. The watch industry as a whole has been in steady decline, and the current lineup of smartwatches does not bring with it, the allure to reverse this trend.

The Others

The Apple Watch is classified under “other products” in the company’s 10-K. For it to command its line item, the sales must be comparable to that of the iPhone, iPad and Mac, which looks light years away at the moment. In 2015, other products (including the Apple TV, the Apple Watch, Beats products, the iPod and accessories) were just 4.27% of the total sales.

On a lighter note: the sixth generation iPod Nano, released in 2010, could play music, store photos, had an inbuilt pedometer and came with a watch face. It cost less than $175 including the strap which is still less than half of what an Apple Watch costs.

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