Where are all the wearables?

Smartwatches and fitness bands were destined to be the next big thing, but a couple of years down the line, is the local market maturing as expected?

'Wearable tech is still very much a growing category'

The wearables product category is still in relative infancy, but despite early hype the current signs are that the smartwatch is struggling to grasp the baton from the fitness-tracking wristband and evolve the category. Whether other form factors which are just starting to enter the market, such as head-mounted displays (virtual and augmented reality headsets) and hearables (smart earbuds), will enhance category sales remains to be seen. For the purposes of this article, however, we’re looking at the smartwatches and health bands only as they’ve got some local sales history.

The noises coming out of the international tech media last year don’t paint a positive outlook for the category – news of lay-offs in Intel’s wearables team and Apple’s watch sales in Q3 being down 70% year on year. According to Gartner’s Hype Cycle for Wearables in 2016, smartwatches have just left the ‘peak of inflated expectations’ and are plummeting into the ‘trough of disillusionment’ to join fitness-tracking wristbands. But, what is the outlook for this emerging market locally?

“South Africa has quickly adopted such connected smart devices,” says Jenna Chisnall, marketing manager, Garmin South Africa.  

Linda van der Nest, executive: Apple marketing, Core Group Southern Africa, agrees: “Wearable technology has grown increasingly popular in South Africa over the last couple of years.”

And that’s not just the opinion of the vendors and distributors, but also retailers. “Our business has seen growth in the upper 20% region; the popularity is growing year on year,” says Nazim Cassim, MD, DionWired.

A similar trend is happening at Takealot. “Wearable tech is still very much a growing category and we’ve seen great response to wearable tech promotions,” says Julie-Anne Walsh, Takealot’s chief marketing officer.  

Early adopters
Until now, many of the interviewees agree, the local wearables market has been driven by consumers in the higher income segments (LSM 8-10) and are most likely highly active younger adults. “It’s not really a teen market, definitely more adult than youngster,” observes Cassim.

Mark Walker, associate vice president: sub-Saharan Africa at IDC Middle East, Africa and Turkey, classifies wearables early adopters as: “People on Vitality health plans, i.e. corporate-sponsored consumers; fitness enthusiasts and techie trendoids.”

Cassim provides some anecdotal evidence into what’s being purchased by these early adopters. “We don’t have clear analytics of who’s buying what, but we’re selling a lot of larger-faced smartwatch devices, with black being the most prominent device colour. This suggests to me the smartwatch is probably a more male-centric market. Based on the sales of colours that are most popular, such as purple, I suspect females are more likely to buy fitness bands,” he says.

More than a heart beat

Nikki Friedman, Fitbit brand manager, Core Group Southern Africa, says: “Fitbit has a product for everyone, from someone who just wants to improve their basic everyday fitness levels to seriously dedicated athletes and swimmers.”

Chisnall says Garmin similarly boasts a number of different models that “cater for every lifestyle – from gym-goers to triathletes and outdoor adventurers.”

While varied in their niche segmentation, both are focused on one similar area – health and fitness. Although, this is the raison d’etre of the forerunning fitness bands, health monitoring is still seen as the main driver of smartwatches – which could be a factor for the more technologically-advanced category failing to gain as significant traction as initially hoped.

“When it comes to the primary function driving smartwatches, it’s predominantly health,” says Craige Fleischer, director: Integrated Mobility, Samsung Electronics. “But users want multiple things from the smartwatch – that multi-functionality was behind the success of smartphones. Personally, I use mine mainly for communications functions, such as e-mail and SMS notifications.”

“The functionality of smartwatches, once you get used to what’s on offer, will keep people hooked,” says Cassim, “it goes beyond fitness, especially now with various apps also available including boarding passes, QR code vouchers and others."

IDC’s Walker believes the fact that there’s a lack of a clear killer app outside of fitness and messaging is limiting potential sales.

Arthur Goldstuck, MD of World Wide Worx, says the perception that smartwatches are only a second screen for smartphones, i.e. a companion device, is the true weakness of most high-end smartwatches.

That said, the association with the high-end smartphone brands is a factor driving smartwatch sales locally. One reason is that mobile operators are offering smartwatches on similar payment models. “South Africans have been buying smartwatches as standalone devices outright, but with the cellular contract addition – which gets over affordability issues and creates the opportunity – this is helping to drive the space. Consumers know that they’re paying off the device over a two-year period,” says Fleischer.

That association with the smartphone pricing model isn’t the only positive to be taken from the mobility space.

“The market dominance of smartphone players is what people want in smartwatches. The Samsung and Apple brands are growing significantly. We have also just secured the TAGHeuer smartwatch, which we have high hopes for," says Cassim. He acknowledges, however, that some other brands have failed to cut it. "There have been a few unsuccessful brands, but that’s down to consumer preferences.”

Walsh says most sales success at Takealot to date has been led by brand affinity. “Wearable devices tend to be dominated by aspirational brands like Garmin, Apple and the like. But, increasing numbers of entry-level brands are becoming available, making the category more affordable to a larger number of our customers across South Africa,” she says.

Turning niche into mass

In an emerging technology market in a developing economy, like South Africa, a key way to increase penetration is to offer it at a more widely-accessible price.

This is an opportunity for other brands. Taryn Hyam, head of Communications, Mobile in Africa – the South African distributor for Xiaomi – says Xiaomi’s core philosophy is “making the best technology accessible to more people. We offer the Mi Band Pulse for the recommended retail price of R399, opening the wearable category market up to many more consumers who would previously never have considered a wearable as a possibility,” she says.

When asked about the number of new devices being demonstrated at this year’s CES, Walker provides his take on the availability of more models at lower price points: “The proliferation of devices isn’t always a sign of a growing market; sometimes it’s a sign that low-cost manufacturers are trying to capture what was a growing market. The global trends in wearables are strongly downwards right now, and if anything a bunch of knockoff products coming out of China may only hasten that.”

The retailers, distributors and vendors that the Margin spoke to are largely positive about the growth potential of the wrist-bound wearables. It seems though that the analysts are less bullish. Who will be proved right? Time will tell.

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