the wearables report 2016 - deborah weinswig...jun 21, 2016 · 2016 market at $28.7 billion, and...

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DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

• Thewearabletechnologymarketwillbeworth$28.7billionin2016,andthenumberofunitsshippedwillclimb18.4%,to 275 million, according to estimates by the market-measurementfirmGartner.

• In the first quarter of 2016, the top-selling wearablesbrandswereFitbit (with 4.8million units shipped), Xiaomi(3.7million) andApple (1.5million), according tomarket-measurementfirmInternationalDataCorporation(IDC).

• We see two major trends underpinning the continuedgrowth of the wearables market. First, the emergence of“wearables 2.0” will shift the category from stand-alonedevices to lifestyle-enhancing systems tying togethermultipleconnecteddevicesandcloudservices.Second,theclothingandsportswearcategoriesarelikelytoseea jumpin wearables offerings, with mass-market brands such asGoogle,Levi’sandNikelaunchingnewproducts.

• Innovationandchangearerife inthewearablesmarket.Alarge number of startups—fueled by access to cheapcomponents, 3D printing and willing crowdfunders—haveemerged,and somehavebeen further fundedoracquiredbyventurecapitalfirmsorcorporatebuyers.

THE WEARABLES REPORT 2016:

REVIEWING A FAST-CHANGING MARKET

D E B O R A H W E I N S W I G M A N A G I N G D I R E C T O R ,

F U N G G L O B A L R E T A I L & T E C H N O L O G Y d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m

U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9

C H N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6

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TABLEOFCONTENTS

E X E C U T I V E S U M M A R Y 3

A M A R K E T S E T F O R D O U B L E - D I G I T G R O W T H 5

I N V E S T M E N T A C T I V I T Y 6

W E A R A B L E S B Y P U R P O S E 8

FITNESSANDWELLNESS..........................................................................................................................8HEALTHCARE........................................................................................................................................8LIFESTYLE.............................................................................................................................................9GAMINGANDENTERTAINMENT................................................................................................................9

W E A R A B L E S B Y T Y P E 9

CONSUMERPREFERENCES 91 . H E A D ....................................................................................................................................10EARWEAR 11ARDEVICES 12VRDEVICES 12OTHERHEADWEAR 13

2 . B O D Y ....................................................................................................................................14SMARTGARMENTS 14OTHERBODY-WORNFITNESSMONITORS 18BODYCAMERAS 19

3 . W R I S T ..................................................................................................................................20FITNESSWRISTBANDS 20SMARTWATCHES 22

E C O S Y S T E M S A N D T H E I O T : T H E F U T U R E O F W E A R A B L E S 24

K E Y T A K E A W A Y S 24

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Executive Summary

TheShapeoftheMarket

In2016,theglobalwearabletechnologymarketwillbeworth$28.7billion,andbrands in thismarketwill ship275millionunits,up18.4%over2015levels, according to market-measurement firm Gartner; these figuresinclude a substantial contribution from borderline subcategories such asBluetoothheadphones.GartnerforecaststhattotalwearableunitsshippedwillgrowataCAGRof17.9%between2015and2017,withthewrist-wornwearablessegmentgrowingthefastest,ataCAGRof30%.

According tomarket-measurement firm IDC, in the first quarter of 2016,thetopwearablesbrandswere:

• Fitbit,with4.8millionunitsshipped.• Xiaomi,with3.7millionunitsshipped.• Apple,with1.5millionunitsshipped.• Garmin,with0.9millionunitsshipped.• SamsungandBBK,whicheachshipped0.7millionunits.

Themarket’srapidadvanceisreflectedbydevelopmentsattopbrands:

• InMay2016,ProjectJacquard,apartnershipbetweenGoogleandLevi’s, unveiled a connected jacket designed for urban cyclists.The jacket has functionality similar to that of a smartphone;wearerscancontroltheirmusicandanswercallsusingtechnologyembeddedinthesleeve.

• In the same month, news websites reported that Jawbone hadslowed manufacturing of its UP range of wristbands and wasforced to sell its remaining inventory to a third-party reseller inorder to raise funds. However, Jawbone said it remainscommittedtotheconsumerwearablescategory.

In2016,theglobalwearabletechnologymarketwillbeworth$28.7billion,andbrandsinthismarketwillship275millionunits,up18.4%from2015levels.

Source:Shutterstock

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ProspectsandInvestments

Ourviewisthatthewearablesmarketwillcontinuetogrowinthecomingyears, but that a slowdown is possible before the release of “wearables2.0,” a second generation of products offering improved autonomy anduse cases. Wearables 1.0 are effectively just another screen forsmartphones.Weexpectthesecondgenerationofwearablestoconsistofsmart devices that act in conjunction and integrate with the Internet ofThings(IoT)autonomously.

Venture capital (VC) firms have invested nearly $2.6 billion inwearablescompaniessince2008,accordingtoouranalysisofCrunchBasedata.Some$1.5billionofthatwasinvestedin2014and2015alone.

Wearables are naturally converging with the IoT, and a number ofcompanieshavefocusedoncreatingsoftwareecosystemsforwellnessandpersonalhealthcaremonitoring.SportswearcompaniesandITgiantssuchasGoogleandApplearealsodevelopingsoftwarethatconnectsdevices.

SegmentationoftheMarket

Inthisreport,wehavedividedwearablesintocategoriesbasedonthepartofthebodyonwhichtheyareworn:head,bodyorwrist.

• Wearables for the head comprise a reasonably mature segment;headphonesaloneareworthabout$10billionperyear,andBluetoothheadphonesaccountforabout55%ofthattotal.Otherdevicesinthecategory include virtual reality (VR) and augmented-reality (AR)headsets.

• Wearables for the body include smart T-shirts, body cameras, high-visibility jackets, socks, shoes, bras and chest straps. Sportswearcompanies are highly active in this segment and are working onconnecting fitnessandwellness-tracking deviceswith health-relatedsoftwareecosystems.

• Wrist wearables is a segment that has experiencedmassive growth,partlythankstoApple,whichshippednearly12millionAppleWatchesin2015,accordingtoIDC,despitelaunchingonlyinAprilofthatyear.Apple’sentry inthepremiumwatchsegmenthasevenspurredsomeluxury watchmakers to create their own smartwatches. Anothernotable maker of wrist wearables is Fitbit, which sold close to $2billionworthoffitnessbandsandotherproductsin2015.

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116.46 129.93 145.54

81.49109.35

137.7334.06

35.31

39.42

2015 2016 2017

Body

Wrist

Head

A Market Set for Double-Digit Growth

Thewearablescategoryisoneofthehottestconsumergoodsmarkets,andverystronggrowthisexpectedintermsofunitsshippedandretailsalesin2016 and the coming years. This report offers our latest overviewof themarket, bringing together market data and forecasts, company andsubcategory profiles, and our wrap-up of the latest developments andproductlaunchesbysubcategory.Webeginwithasummaryofkeydataonthesizeofthemarketandthedistributionofmarketshare.

MarketContinuestoGrowApace

Market-measurement companies have offered various forecasts for thewearable technology market—the one thing they agree on is that themarketisgrowingfast.InJanuary,Gartnerforecastthatthetotalnumberofwearableunitsshippedgloballywillgrowby18.4%yearoveryear,from232millionin2015to275millionin2016.Thefirmexpectsunitshipmentsto grow by 17.5% in 2017, to 323millionworldwide. Gartner values the2016marketat$28.7billion,andforecaststhat:

• Wrist wearables will experience the highest growth within thewearables segment; smartwatches and fitness bands are forecast togrowatCAGRof30.0%between2015and2017.

• Wearablesworn on the head, including VR/AR devices, earwear andBluetoothheadsets,willgrowmuchmoreslowly,ataCAGRof7.6%,largelyduetothematurityoftheheadphonesmarket.

• Wearables for the body, including apparel, sportswear and bodycameras,areforecasttogrowataCAGRof11.8%.

Figure1.WearableUnitsShipped(Mil.)

Source:Gartner

Other market-measurement firms have estimated more conservativefigures, likely due to definitional reasons, such as whether Bluetoothheadsets are considered wearables. IDC, for instance, estimates thataround 110 million wearable devices will be shipped in 2016, up 38.2%year over year. The firm forecasts that 100 million smartwatch andwristband units will be shipped this year, along with 9.8 million unitsspreadacrossclothing,eyewearand“hearables”(hi-techin-eardevices).In2017,totalwearableshipmentswillgrowby26.1%,reaching137.8millionunits,IDCforecasts.

WearablesCAGRs2015–2017

Body:11.8%Wrist:30.0%Head:7.6%

Total:17.9%

274.59 322.69

232.01

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FitbitLeadsbyUnit-VolumeMarketShare

IDC said the topwearablesbrandowners in the firstquarterof 2016,bynumberofunitsshipped,were:

• Fitbit,with4.8millionunitsshippedinthequarter.

• Xiaomi,with3.7millionunitsshipped.

• Apple,with1.5millionunitsshipped.

• Garmin,with0.9millionunitsshipped.

• SamsungandBBK,whicheachshipped0.7millionunits.

Across2015,thebrandrankingswerebroadlythesame.

Figure2.WearableUnitsShipped,byBrandOwner,2015

Units(Mil.)

Fitbit 21.0

Xiaomi 12.0

Apple 11.6

Garmin 3.3

Samsung 3.1

Others 27.0

Total 78.1Source:IDC

It is worth reiterating that IDC’s definitions exclude some borderlinewearablescategories,includingBluetoothheadsets,thatsomeotherfirmssuch as Gartner include in their market totals. IDC’s market researchfocusesonfitnessbands,smartwatches,apparelandhearables.

Outlook:ConnectedSystemsWillFormWearables2.0

Ourviewisthatthewearablesmarketwillcontinuetogrowinthecomingyears, but that a slowdown is possible before the release of “wearables2.0,” a second generation of products offering improved autonomy anduse cases. We expect wearables 2.0 to incorporate multiple connecteddevices and cloud services that, together, offer more meaningfulenhancementstousers’lifestyles.

Wearables 1.0 are effectively just another screen for smartphones: thedevices include technology that is easily copied, and they have limitedfunctionality and normally require a connection via a smartphone. Thesecond generation of wearables will consist of smart devices that act inconjunctionandintegratewiththeIoTautonomously.Oneexampleofthistypeofproduct is Sony’s Experia system,which combineswearables andthe IoT inorder to functionasapersonalassistant.Another isconnectedgarments from SensorKit, which rely on multiple sensors to detect thewearer’sactivities.Thesensorsthencommunicatethedatatoasoftwareplatformthatinterpretsandmeasuresthewearer’smovements.

Investment Activity

VC firms have invested nearly $2.6 billion in wearables companies since2008,accordingtoouranalysisofCrunchBasedata.Overhalfofthattotal

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($1.6billion)hasgoneintoCalifornia-basedstartups,andsome$1.5billionofthetotalwasinvestedin2014and2015alone.

WesummarizesomeofthemajorM&Aactivitybymarketsegmentlaterinthisreport.

Figure3.VCFundingforWearablesCompanies(USDMil.)

Fung Global Retail & Technology’s Market Matrix

Thewearablesmarket is seeingnewsegmentsdevelopandexistingonesmerge. Fitness trackers are overlapping with smartwatches and withsoftware/cloudsolutions thatconnect tomultipledevicesand to the IoT;headphones embedded with smart sensors are converging with thehearing-aid market; and autonomous products such as Nike’s self-lacingshoesarebeinglaunched,furtherblurringtheboundariesofwearables.

Below is our matrix of companies active in key wearables segments,followedbyadiscussionofthekeyusesforthedevices(suchasfitnessandwellness),andareviewofproductdevelopmentsandmarketgrowth.

Figure4.WearablesMarketSegmentation

Head (e.g., Bluetoothheadsets)

Wrist(e.g.,smartwatches) Body(e.g.,bodycameras) IoT (connectedsystems)*

Fitness andWellness

EarinSpreeWearablesFreeWavzMuse

FitbitJawboneXiaomiSuunto

LechalAthosLeoOxstrenOMsignalReTiSense

UnderArmourPolar

Healthcare SonovaSiemensGNResoundEargo

BodyCapMediWiSeMonicaHealthOmronHexoskinBionikLaboratoriesMC10

Withings

Lifestyle JabraSennheiser

AppleSamsungGear

NikeBelty

Bluesmart

$35 $2.5 $32.1

$292$357 $361.5

$1,064.9

$444.8

2008 2009 2010 2011 2012 2013 2014 2015

Source:CrunchBase

VCfirmshaveinvestednearly$2.6billioninwearablescompaniessince2008,accordingtoouranalysisofCrunchBasedata.

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PlantronicsBlueAntSonyBoseInteraxonDopplerLabsMotorolaBragi

PebbleGarminAsusTagHeuerLGLenovoSmaWatchWiseWear

WiseWearThinxVictoria’sSecretRalphLaurenUnderArmour

Gaming andEntertainment

OculusRiftGoogleGlassHTCViveHoloLensPlayStationVRLumusOpticalMagicLeap

SonyGoProNarrativeThalmicLabs

Somecompaniesareactiveinseveralcategories.Forsimplicity,wehaveorganizedthembythemainareaofactivityrelatedtowearables.*TheIoTsegmentdoesnotconsistofindividualwearables,butofecosystemswheremultiplewearablesand/orotherIoT-connecteddevicesformagroupofproductsthatworktogether.Forexample,Polarcombinesitsfitnesssoftwarecloudwithawristtrackerandasmartscale.Source:Companywebsites/FungGlobalRetail&Technology

Wearables by Purpose

Althoughwecategorizewearabledevicesbythepartofthebodyonwhichtheyareworn,thecoremeansofsegmentingwearabletechnologyisbyitsprimaryuse.Asshowninthefirstcolumninthematrixabove,weidentifyfourcoreusecases:fitnessandwellness,healthcare,lifestyle,andgamingandentertainment.

FitnessandWellness

Fitness and wellness wearable devices are designed to sense and trackdatapointssuchasbodytemperature,workouttime,distancecoveredandheart rate. Most of these are worn on the wrist, but there are also anumberofclip-ons,chestbands,legbands,smartgarmentsandear-worndevicesonthemarket.Numeroussoftwareapplicationsareincludedwiththese,fromverybasicmeasuringandmappingofrunningroutestomoreadvancedofferings,suchascoaching,analysisanddailyrecommendationsforoptimizingone’sfitnessandwellness.

Healthcare

Healthcare usage in wearables covers both consumer and patientapplications. Consumer healthcare products are noninvasive and can bepurchasedoverthecounterwithoutaprescription.Ifsoldasahealthcareproduct, these wearables may be more heavily regulated. Patienthealthcareproducts(medicaldevices)arestrictlyregulatedbytheUSFoodand Drug Administration and the European Commission, among otheragencies. Healthcare wearables include hearing aids and sensors thatmonitorheartrate,bloodpressureandglucose.Thesegmentalsoincludes“lifestylemedical” cloud software applications that can collect data fromvariouswearables.

Healthcareusageinwearablescoversbothconsumerandpatientapplications.Consumerhealthcareproductsarenoninvasiveandcanbepurchasedoverthecounterwithoutaprescription.

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Source:Apple.com

In2015,ApplestartedtrialsforitsHealthKitcloudsolutionwithanumberofUShospitals.InMarch2016,thecompanyreleasedCareKit,describedas“anewsoftwareframeworkdesignedtohelpdevelopersenablepeopletoactively manage their own medical conditions.” The idea behind thesepersonal health record systems is to help patients manage their ownconditionsandassistphysiciansintreatingpatients.

Lifestyle

We characterize lifestyle wearables as products whose design is key totheir sale. This segment is effectively a subset of the broader lifestylebrands segment, which spans apparel, technology and other categoriessuchashomegoods.WeseeAppleasacorelifestylebrandanditsAppleWatch as a core lifestyle wearable; arguably, the main driver of AppleWatchpurchases is thevalueof thebrandanddesign.WebelieveNike’ssoon-to-be-launched HyperAdapt self-lacing shoe is also a lifestyle item,givenNike’sbrandstrength.

GamingandEntertainment

The gaming and entertainment segment overlaps significantly withwearablesdesignedforindustrialandenterpriseapplications.Forexample,most AR wearables that are currently available target industrial andenterpriseuse cases,whileVRdevices are almost exclusively targeted toconsumers via gaming and entertainment applications. However, only alimited range of games and software are designed to incorporate VR, sodevelopers are still exploring various use cases for VR devices. It alsoremainstobeseentowhatextententerpriseswillbewillingtopayforARwearables.

Wearables by Type

We segment the wearable device universe by the part of the body onwhich the devices areworn. Below,we detail recent activity frommajorbrands,alongwithmarketestimatesandforecasts,brokenoutbythepartofthebodyonwhichthedevicesareworn:head,bodyorwrist.

ConsumerPreferences

In a 2014 studyby Forrester, some16,200 consumers across theUS andEurope were asked about their preference for wearing a sensor device.Overall,US consumers reactedmorepositively to the idea thandid theirEuropean counterparts. Butmore than one-third of all consumers polled

Morethanone-thirdofallconsumerspolledbyForresterrespondedpositivelytotheideaofusingasensordeviceontheirwrist.

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responded positively to the idea of using a sensor device on theirwrist.The wrist also proved the most popular location for a wearable deviceamongthosesurveyed.

Figure5.PercentofUSandEuropeanInternetUsersRespondingFavorablyto“HowInterestedWouldYouBeinWearing/UsingaSensorDevice,AssumingItWasfromaBrandYouTrustorOfferedaServicethatInterestsYou?”(2014)

Base:4,556USInternetusersaged18+;11,647EUInternetusersaged18+Source:Forrester

1. Head

TheheadwearablescategoryincludesBluetoothearphonesandARandVRheadsets. Somemarket-measurement firmsdonot incorporateanyorallofthese intheirdataforthewearabletechmarket,butweincludethesewithinourdiscussionofthebroaderuniverseofwearables.

42%

35%

19% 18%21%

36%

23%

15%12%

10%

OnWrist ClippedontoClothing

EmbeddedinClothing

OnGlasses InEarphones/Headphones

US

Europe

Source:SmartWatchReview

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EarwearThe earwear segment is mature and there is intense competition in thecategory from established audio brands such as Sennheiser and Bose.Amazon.co.uklistedmorethan1,000SKUsforBluetoothheadsetsinApril2016,andabout500of themwereearbuds.Market intelligence firmABIResearchestimated thatBluetoothheadset retail revenues totaledabout$5.5 billion in 2014 (including stereo and mono headsets) and that thecombinedwiredandBluetoothheadsetmarketwasworthmorethan$10billionthatyear.ABIforecastthatgrowthofBluetoothheadsetsaleswouldoutpacethatofwiredheadsetsalesbetween2014and2019,withaCAGRof18.7%.

Figure6.GlobalHeadsetRevenues,2014(USDMil.)

Source:ABIResearch

Mostof the larger consumerelectronics companiesoffer earwear. Theseproductsarehighlyinfluencedbycelebrityendorsementsandfashionabledesigns,andincludeproductsfromBeatsbyDre(whichhasbeenacquiredby Apple) and 50 Cent’s SMS Audio (which has partnered with Intel).Accordingtonewswebsite9to5Mac.com,Apple isgearingupto launchabrandedheadphonecalledAirPodswiththenewiPhone7.

Continued product miniaturization and noise-cancelling and audioinnovationscouldleadtheearwearsegmenttoconvergewiththehearing-aidmarket in the near future. The global hearing-aidmarket was worth$6.2billion in2015,accordingtoResearchandMarkets.Bone-conductinghearingaids,whichtransmitsoundstoauser’searsthroughvibrationsonhisorherskull,havebeenaroundforawhile,buttheyhaveonlyrecentlybecome available for consumers. Damson, AfterShokz and Panasonic areamongthebrandsofferingbone-conductingdevices.

Earbudproductshavealsoprovedpopularoncrowdfundingsites:

• RippleBuds raised $750,00 by the end of April in its crowdfundingcampaignonKickstarter.

• Earin raised $1.4 million on Kickstarter in June 2014. The Earinproduct,which does not include any sensors or amicrophone,wasshipped to preorder customers in October 2015 and now retails at$249.

$4,500

$500

$2,500

$3,000

WiredHeadsets(Stereo)

WiredHeadsets(Mono)

BluetoothHeadsets(Stereo)

BluetoothHeadsets(Mono)

Continuedproductminiaturizationandnoise-cancellingandaudioinnovationscouldleadtheearwearsegmenttoconvergewiththehearing-aidmarketinthenearfuture.

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• Bragi raised $3.4million on Kickstarter for its Dash earbuds, whichinclude27sensorsandretailat$299.

Source:Earin.com

Source:Bragi.com

ARDevicesAR applications have clearly defined industrial and business-to-businessusecases.Buthardwareandsoftwarepricesarelikelytoremaintoohighto ensuremass consumer uptake in the immediate future, and it is stillunknownifevenindustrywillbewillingtoinvestinARatcurrentprices.

Goldman Sachs lists four main players in AR: Google Glass, MicrosoftHoloLens,ODGSmartglassesandAtheer.TheARconsumer segmentmaywell open up in gaming and entertainment, but it could ultimatelyconverge with the lifestyle eyewear market, in particular the high-endsegment.Lifestyleeyewear isworthabout$90billionperyear,accordingto2015datafromEuromonitorInternational.

In2015, Intelpartneredwith Italianeyewearmanufacturer LuxotticaanditsOakleybrand to fusepremium, luxuryand sportseyewearwith smarttechnology.According to technewswebsiteSlashgear.com,Luxotticahascollaborated with Google as well. In 2015, Intel acquired ReconInstruments,anARheadsetmanufacturer,furtherenhancingitspositionintheconsumersmart-glassescategory.

VRDevicesThe VRmarket has opened upwith the introduction of “smartphone VRsets,”whicharemostlypricedfrom$10–$150.Essentiallyaboxwithtwoholes to see through, suchdevices canbe connected toa smartphone in

Above,fromtop:MicrosoftHoloLens,$3,000;ODGR7Smartglasses,$2,750;AtheerAiR,$3,950;GoogleGlass,$1,500(discontinued;GoogleGlassv2.0isscheduledforreleaseinsummer2016)Source:Companywebsites

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ordertoconvertitintoaVRset.GoogleCardboardisoneofthecheapestversions on the market, and the boxes are produced by a variety ofsuppliers.

“Proper”VRheadsetsincludeabuilt-inscreen,anaccelerometerandotheradvancedelectronics.Examplesof these include theOculusRift, releasedinApril 2016with a sellingpriceof $600; the SonyPlayStationVR, tobereleasedinthefourthquarterof2016withapriceofabout$400;andtheHTCVive,whichbeganshippinginApril2016withapriceofaround$799.

SmartphoneVRHolders

GoogleCardboardandSamsungGearVRSource:Google.com/Samsung.com

OtherHeadwear

SpreeSmartCapandArchosMusicBeanySource:SpreeWearables.com/Archos.com

Spree Wearables offers various headwear products, including theSmartCap and the Spree Headband fitness monitor, as well as a fitnessapp.TheSmartCapwaslaunchedin2014andSportsIllustratedawardedit“Best in Show” at the CES trade show that year. Amazon.com lists theSmartCap for $185, including delivery. Also in 2014, Archos, whichproduces a range of smartphones, tablets and IoT gear, launched theArchos Music Beany. This hat is currently available from the Archoswebsiteforabout$40.

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2. Body

SmartGarmentsA number of clothing brands have produced apparel with built-intechnology.However,thelongevityandappealofsomeofthesegarmentshasbeenlimited,insomecasesapparentlyduetoopportunisticmarketingand a lack of strategic foresight. For example, toward the end of 2014,Victoria’sSecretlauncheda$75heart-monitoringbrabasedontechnologyfromClothing+,buttheproductappearedtohavebeendiscontinuedwhenwesearchedforitinJune2016.

ProjectJacquardjacketcuffSource:Google.comA wearable tech partnership that has recently borne fruit is ProjectJacquard,whichGoogle and Levi’s launched in 2015 todevelopproductsthatuseconductivetextilesandmachinelearningtointerpretmotions.InMay 2016, the two companies unveiled a connected jacket designed forurban cyclists. The jacket has smartphone-connected functionality thatallows users to control their music and answer calls using technologyembeddedinthejacket’ssleeve.

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Clockwisefromtopleft:ClothingfromFhossTechnology,LumoandVisijaxSource:Companywebsites

Anumberofsmallercompaniesareproducingsafetywearforcyclistsandworkers in the building trades. Visijax and Lumo are two UK-basedmanufacturers of garments with built-in, battery-powered LEDs. FhossTechnology creates similar, high-visibility clothing that is targeted tocustomers in the construction industry. The company had revenues ofabout$120,000 in2014.Acompanycalled Infi-texproducesaconductiveink that can be applied to garments pre- or postproduction, making itpossible to create flexible electrical circuits on top of garments. Thecompanysays ithasexperiencedan increase in inquiriesover the last12months.

SmartGarments:SportswearandtheIoT

Source:Nike.com

NikewillreleaseitsHyperAdapt1.0self-lacingshoeinthefourthquarterof2016,initiallyonlytousersoftheNike+app.Theshoewillenablethewearertogetjusttherightfitandtightnessasit“adapts”tothewearer’sfoot.

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Clockwise from top left: AdidasmiCoach Football; UAGemini 2; AdidasmiCoach Fit Smart;UAScale(partofHealthBox)Source:Companywebsites

Since 2013, Adidas, Under Armour and Asics have spent a combined $1billion acquiring companies that develop fitness and health softwareapplications. Nike dropped its fitness-tracking-band division in 2014, buthassincedevelopedtheNike+fitness-trackingsoftwareapplication,whichisfeaturedontheAppleWatch.Underscoringtheimportanceofsoftwareapplications to the sportswear market, in January 2016, Under Armourpartnered with IBM Watson to ensure that UA Record software usersreceive notifications that help themoptimize their daily fitness,wellnessandsleeprhythms.

Therehasbeenotheractivityinthissegment,too:

• Under Armour has been partnering with HTC since 2015 to developwearablesandIoTgear.

• Adidasislicensinganddevelopinghardwaretechnologyin-house.

• Asics isofferingSony’sSmartB-Traineron itswebsite incombinationwiththeMyAsicsactivity-trackingandcoachingsoftwareapplication.

• Nikehasallowedmostfitnessandactivityhardwaretrackersandgearto connect to itsNike+ coaching andpersonalized fitness andhealthsoftware platform, and the company is focusing its efforts onfunctional wear powered by mechatronics (a mixture of electronicsandmechanics)inordertoattractuserstoitsplatform.

• Nike will release its HyperAdapt 1.0 self-lacing shoe in the fourthquarterof2016, initiallyonlytousersoftheNike+app. Itwillbethefirst mass-produced self-lacing shoe and will rely on a mixture ofmechanical and electronic engineering for its functionality, enablingthewearertogetjusttherightfitandtightnessastheshoe“adapts”to the wearer’s foot. The price and release date have not yet beenannounced.

• UnderArmourlauncheditsHealthBoxinJanuary.For$400,customersgetascale,fitnesswristbandandachest-strapheart-ratemonitor.ThesetincludesasubscriptiontoappssuchasMapMyRun,MyFitnessPal,EndomondoandUARecord.

• In February, Under Armour launched its UA Record–equippedSpeedForm Gemini 2 smart shoes, which retail for $150. The shoes

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include an auto-sleep fitness sensor that activates the trackingfunctionality when thewearer is working out. The shoes can recordfive runs’worthof details before the runnerneeds todownload theinformationtoacomputerorsmartphone.

• In January, New Balance announced that it was launching a DigitalSport division to develop wearable, embedded and analytictechnology. The company also revealed that it was partnering withIntelondevelopingasportswatchforrunners.

NikeHyperAdapt1.0,UAHealthBoxSource:Nike.com/Underarmour.com

Source:Adidas.com

Adidas was an earlymover in wearable technology. In 2008, it acquiredTextronics,aspin-offfromDuPontTextiles&InteriorsthatwasbackedbyPhysic Ventures. The company developed wearable sensors for use infitnessandhealthmonitoring,andStaceyBurr,itsCEO,movedtoAdidasasVP of Wearable Sports Electronics. In 2015, Adidas acquired fitness andhealth applications developer Runtastic. Adidas produces a range ofwearablefitnesstechnologyunderthemiCoachbrand,whichisakey linefor the company and includes fitness and health software developed byExos and hardware from Mio. In April 2016, Adidas.com listed ninemiCoachproductsranginginpricefrom$30–$420.

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SmartSports:SummaryProfiles

Figure7.Nike(2015)

Revenues $30.6billion

Category%ofRevenues Footwear 59.7%Apparel: 28.1%Equipment: 5.3%Converse: 6.5%GlobalBrands:0.4%

Wearables HyperAdapt 1.0 (shoes)FuelBand(discontinued)

SoftwareApp Nike+

Source:Companyreports/FungGlobalRetail&Technology

Figure8.Adidas(2015)


Category%ofRevenues Footwear 49.4%Apparel: 41.2%Hardware:9.4%

Wearables FitSmart(fitnesswristband),SmartRun(smartwatch),SmartBall(soccerball),X-Cell(chest-strapheart-ratemonitor),SpeedCell(fitnessclipforshoes),HeartRateMonitor

SoftwareApp miCoach


Figure9.UnderArmour(2014)


Category%ofRevenues Footwear: 19.7%Apparel: 65.6%Accessories: 10.7%Licensing: 2.3%ConnectedFitness:1.7%

Wearables UAHealthBox(setofproducts),UABand(fitnesstracker),UAScale,UAHeartRate(cheststrap),UAHeadphones(Bluetooth),GeminiSpeedForm2(shoes)

SoftwareApp UARecord,MapMyFitness,MyFitnessPal,Endomondo


Asics had revenues of about $4 billion (¥428 billion) in 2015, but thecompanydoesnotbreakdownsalesbycategory.

OtherBody-WornFitnessMonitors

Some fitness monitors include clips or other types of fasteners forattachingthemtothebody.Gartnerhasforecastthatthenumberofchest-strap and other body-worn devices will remain stagnant, at about 33million units shipped per year. However, the firm predicts that this

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segment’s share of the overall wearables market will drop from 15% in2015tojustover10%in2017.

UAHeartRatecheststrap,whichisincludedintheUAHealthBoxSource:Underarmour.com

BodyCameras

In the body cameras segment, new entrants, smartphonemanufacturersandtraditionalcameramakersarefightingformarketshare.GoProistheleaderinthesegment,with2015revenuesof$1.6billion.Itscamerasstartatabout$130andpricesgouptoabout$580forpremiumcameras.Sonyand Panasonic are also active in the segment, but they have elected tocreatecamerasforgeneraluseandtoofferattachmentsthatcanbewornonthechestorhead (orbydogs) rather thantocreatecameras thatarespecificallydesignedtobewornonthebody.

Thesegmentiscrowdedwithnumerousgenericbrandsandvarioustypesof “spy cameras” in the $20–$70 range, which are providing toughcompetitionforthemoreestablishedbrands:

• iONandXiaomiaretwobrandsfightingitoutinthesub-$100rangeofwearablecameras.

• The midrange, where cameras run from about $150–$400, ispopulatedbybrandssuchasNarrative,PolaroidandVievu.

• GoProhasestablisheditselfatthemedium-to-highendofthemarket.

• Nikonjoinedthehighendin2016whenitlauncheditsKeyMission360wearable camera, which is priced just below $600. The productcompetesdirectlywithGoPro’sHero4camera.

UnderArmourlauncheditsHealthBoxinJanuary2016.For$400,customersgetascale,afitnesswristbandandachest-strapheart-ratemonitor.ThesetincludesasubscriptiontoappssuchasMapMyRun,MyFitnessPal,EndomondoandUARecord.

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Figure10.PriceMapofSelectedWearableCameras,April2016(USD)

Source:Companywebsites/FungGlobalRetail&Technology

A recent study by Gartner estimates that 170,000 body cameras will beshippedin2016and1.05millionin2017.However,webelievethemarketmay have matured faster than these estimates suggest, and that 2016couldseecloserto1millionunitsshipped.WebaseourownestimateonGoPro’stotalrevenuesfor2015:assumingallthecompany’scamerascost$600andthat10%ofallthecamerasitsoldlastyearwerebodycameras,GoProwouldhavesold270,000bodycamerasin2015,weestimate.

OMGLifewasoneof the first companies toproduceawearablecamera.However, in 2014, the company recognized the unaffordable marketingspend required to build a consumer brand for its Autographer range ofwearablecameras.Initsmostrecentannualaccounts(forfiscalyear2014),thecompanyannounced itwoulddrop its consumer rangeandswitch tolicensingitsintellectualpropertytoconsumertechnologymanufacturers.

3. Wrist

FitnessWristbands

Shipments of activity-tracking wristbands will reach 44.1 million units in2017, up from 30.2 million in 2015, according to Gartner estimates.However, this 46% forecast growth is less than half of the 120%-plusgrowthexpectedforsmartwatches.

The prospect of such growth has heightened competition, which has, inturn, prompted makers of fitness wristbands to respond with closures,acquisitionsandlaunches:

• InMay2016,websiteTechInsiderreportedthatJawbonehadceasedmanufacturing its UP range of wristbands and was forced to sell itsremaining inventory to a third-party reseller in order to raise funds.However, Jawbone was quick to deny these reports, and said itremainscommittedtotheconsumerwearablescategory.TechInsidersubsequently revised its story to report that Jawbone had slowed

580 570

349

150 150

75 70

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400

500

600

700

GoProHero4 NikonKeyMission360

Vievu Polaroid Narraqve XiaomiYi iONSnapcam

USD

Despiteitsgrowth,thebodywearablessegmentillustratesthedifficultyofbuildingconsumerbrandsfromscratch.

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productionofitsdevices,butstoodbyitsclaimsthatthecompanyhadoffloadeditsinventory.

• Following Apple’s 2014 announcement that it would launch asmartwatch,andtherunawaysuccessofFitbit,Nikedecidedtocloseitsownfitnesstrackerdivision.

• In the same year, Intel acquired Basis Science, a maker of fitnesswristbands.

• In2015,FossilacquiredfitnessbandmakerMisfitfor$260million.

• Swatch launched Touch Zero One, a smartwatch targeting beachvolleyballplayers,in2015.

Figure 11. Selected Fitness-Tracking Wristbands: Original Price and Price onAmazon.comasofApril2016(USD)

OriginalPrice

Amazon.comPrice

PolarA360 199.95 190.00

MicrosoftBand2 249.99 174.99

GarminVivosmart 149.99 149.99

BasisPeak 199.99 149.99

AdidasmiCoachFitSmart 199.99 136.30

PolarA300 159.95 130.00

FitbitChargeHR 149.95 129.99

FitbitAlta 129.00 129.00

SamsungGearFit 149.99 119.00

MisfitShine2 99.99 99.99

GarminVivofit3 99.90 99.90

JawboneUP2 99.90 74.30

FitbitFlex 99.95 68.99

GarminVivofit 129.99 49.99

SonySmartBandSWR10 99.99 30.99

XiaomiMi 23.98 23.98

MisfitFlash 29.99 19.99Doesnotincludesmartwatches.Source:Amazon.com

Fitnesswristbandsvaryinpricefromabout$20–$200,withmostbrandedproductsfallinginthe$100–$200range.However,wethinkthe$100-plussegmentwillseefurtherpricepressuresandthatpricesarelikelytodrop,especiallyasthemarketforlower-pricedsmartwatchesgrows.

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Smartwatches

Source:Apple.com

Market forecasts for unit sales of smartwatches have ranged fromenthusiastic to very optimistic, but a lack of data on Apple Watchshipments has added uncertainty to estimates. IDC estimates that 28.3million smartwatches will be shipped in 2016, with Apple Watchesaccountingfor14millionofthese.By2020,some82.5millionsmartwatchunitswillbeshippedannually,IDCforecasts.

Market analysis firm Canalys estimates that Apple shipped 4.2 millionAppleWatches in the second quarter of 2015, following its April releasethat year. Canalys further estimates that theAppleWatch accounted fortwo-thirdsofthesmartwatchmarket in2015,withabout12millionunitsshipped.

Despite its growth, the smartwatch market has experienced downwardprice pressure from manufacturers of cheaper models, such as Airsspu,Yuntab,VcallandUWatch.

SignsthatthemarketmaybecoolingsurfacedinMarch,whensmartwatchbrandPebbleannounced itwould layoff25%of itsworkforceandAppledroppeditsentrypricefortheAppleWatchSportfrom$349to$299.

Cheapergenericsmartwatchesnowstartatabout$20andgoupto$100,whilebrandedsmartwatchesstartatabout$100andgoupto$17,000fortheAppleWatchEdition18-Karat.High-endnonluxurysmartwatchesrangefromabout$250–$600.Apple’sleastexpensivesmartwatchstartsat$299.

TheSmartwatchGroup,anindependentresearchcompany,estimatedthatthe number of smartwatch suppliers more than doubled from 2013 to2014,fromabout40toabout90,andforecastthattherewouldbecloserto300in2016.

Marketforecastsforunitsalesofsmartwatcheshaverangedfromenthusiastictoveryoptimistic,butalackofdataonAppleWatchshipmentshasaddeduncertaintytoestimates.

Despiteitsgrowth,thesmartwatchmarkethasexperienceddownwardpricepressurefrommanufacturersofcheapermodels.

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Figure12.SelectedSmartwatches:RetailPrice,April2016(USD)

Source:Amazon.com/Watchshop.com/Apple.com

LuxurySmartwatchesThe response to the growing smartwatch market from luxury watchmanufacturers has beenmuted to date. However, according to CreativeStrategies, the traditionalwristwatchmarket reached $62 billion and 1.2billionunitsshippedin2015,soperhapsluxurywatchmakers’hesitationtolaunchnewproductlinesisunderstandable.

Apple has released two watch ranges in the luxury segment, the AppleWatchHermès (startingat$1,100)and theAppleWatchEdition18-Karat(which retails for up to $17,000). Breitling, Bulgari, Montblanc and TagHeuer are a few of the luxury brands that have released smartwatches.Bulgari’s smartwatch incorporates anNFC chip andBreitlinghas added asmartphoneconnectiontoitsExospaceB55model.TagHeuer’sConnectedwatchcomesclosesttotheAppleWatchintermsoffunctionality.

Figure13.SelectedLuxurySmartwatches:RetailPrice,April2016(USD)

549 500 499

350 330 299 299 295 289 265 240 220 210 200 195 179 170130 110

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$10,000$9,330

$3,900 $3,300

$1,500 $1,100

AppleEdiqon18-Karat

BreitlingExospaceB55

BulgariDiagonoMagnesium

MontblancTimewalker

TagHeuerConnected

ApplexHermès

Source:Companywebsites/FungGlobalRetail&Technology

Applehasreleasedtwowatchrangesintheluxurysegment,theAppleWatchHermès(startingat$1,100)andtheAppleWatchEdition18-Karat(whichretailsforupto$17,000).Breitling,Bulgari,MontblancandTagHeuerhavealsoreleasedsmartwatches.

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Ecosystems and the IoT: The Future of Wearables

XperiaProjectorandXperiaAgentSource:Sony

Thefutureofthewearabletechnologymarketlookslikeitwillbemarkedby new products in existing categories, strong market growth anddiversification, with brands offering ecosystems of connected devices.Already, some companies are starting to ideate concepts rather thanindividualproducts.Notableexamplesinclude:

• UnderArmour’sHealthBox,whichcomeswithaUAScale,aUABandandaUAHeartRatechest strap,allofwhichconnect toUARecord,thecompany’sfitnessandhealthsoftwareapplication.Customersarekeentomeasurevariousaspectsoftheirhealth,fitnessandwellness,andtheirinteresthasgivenrisetothenotionofthe“quantifiedself.”

• Fitbit, Polar andWithings, which are all diversifying from their coreproductsandofferingsmartscales,amongotheritems.

• Sony,whichhasextendeditsXperiasmartphonebrand.Thecompanynow also offers a smart headset, a smart camera and a smartprojector.Theheadsetcanassistthewearerwithdirections,weather,and updates from socialmedia and email. The Sony PlayStation Eye(camera) is voice activated but can also film automatically. Thecompany’s projectorwill be able tobeam interactive contentonto awallortable.Thecentralthemeisthatthecompanywill incorporatemachine learning in the range, allowing for a more user-centricexperience, with the technology acting as the user’s own personalassistant.

As the market matures, we expect to see the emergence of moreecosystemofferingsthatmixwearablesandcloudapplications.

Key TakeawaysInnovationandchangearerifeinthewearablesmarket.Alargenumberofstartups—fueledby access to cheap components, 3Dprinting andwillingcrowdfunders—have emerged, and some have been further funded oracquiredbyVCfirmsorcorporatebuyers.

Themarketischaracterizedbyanumberofkeytrends:

• The wearables market is merging and overlapping with othermarkets,suchasmedicaldevices.

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• Largercompaniesappeartobedevelopingwearableswithamorestrategic approach; the collaborationbetween Levi’s andGoogleis one example of this. In the past, a number of companieslaunched items such as smart shirts, bras or socks, but theseeffortsseemedtobemainlyforPRvalue.

• Fitness is becoming synonymous with wellness and personalhealth.ThetrendisbeingdrivenbythesportsweargiantsandbyIT companies such as Google and Apple, which are developingwellness data clouds that allow people to measure, track andanalyzemoreoftheirdailyactivities.

More significantly,we see twomajor trends underpinning the continuedgrowthofthewearablesmarket:

• The emergence of “wearables 2.0” will shift the category fromstand-alonedevicestolifestyle-enhancingsystemstyingtogethermultiple connected devices and cloud services. Brands such asUnderArmourarecurrentlyleadingthewayinofferingbundlesofconnectedproductsandservices.

• Wristwear has dominated product launches and driven marketgrowthsofar,buttheclothingandsportswearcategorieslooksetto expand in termsofwearablesofferings. InMay2016,Googleand Levi’s launched their first product collaboration, a smartjacket, and products scheduled to launch later in 2016 includeNike’sself-lacingshoes.

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DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalystJohnHarmon,CFASeniorAnalystThomasAnderssonGuestWriterHONGKONG:10thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223002470LONDON:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NEWYORK:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017FBICGROUP.COM

the wearables report 2016 - deborah weinswig...jun 21, 2016 · 2016 market at $28.7 billion, and...

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