The Market for Wearables

Paul Gray talked about wearable electronics. Until the first world war, watches were kept in the pocket, and wrist watches were seen as “effeminate”. However, the need for accurate time keeping during the war meant that wristwatches were adopted and 10 years after the end of the war, 98% of watches were wristwatches.

The electronics markets are not booming with new devices and applications so there is a search on for the next big category and watches are seen as a big potential market. Watches are a fashion business (Casio has 1500 models!) and even 1980s designs can be seen as fashionable.

The success of new products depends on what changes of behaviour are needed and what benefits the buyer gets back in return. Products that demand a big change in behaviour are not so successful unless there are big advantages to the consumer. Some products are hard to explain and Gray calls these “slow burn”.

As an example, MP3 players were around for a while before Apple changed the interface for small computers and made MP3s easy to manage and that is why they were so successful.

On this basis, wearables need more work to make the benefits easier to obtain. Fitness trackers can have compelling advantages and be addictive, but watch phones need more development – they are a solution in search of a problem. Products with cameras such as Google Glass may even cause legal problems.

Looking at fitness, data is incomplete, for example there is no way to capture food data. Some devices track the quality of sleep, but sleep can be disturbed with no action being possible to correct this (Gray quoted his own sleep being disturbed by cars revving on the “Kudamm” in Berlin. Having data on this doesn’t help!)

However in the west, too many populations are inactive and obese and governments have good reasons to want to change this. The sports market is fragmented because each sport has different needs and devices need to be optimised. Some people love to use their phones for sports, and others hate them.

Samsung has been working on smartwatches since 1999 and the products are getting better. Gray said that smartphones are being optimised for media consumption and they are getting too big to hold easily by people with small hands. That may leave room for applications on the wrist.

Natural language control may be helpful, but “it’s all in the software”, Gray said. Samsung’s switching of software platforms each year shows they understand the importance of the software to the success of the segment.

According to NPD’s research, Chinese consumers are the keenest to buy wearables, with the Japanese least likely to buy.

Turning to Google Glass-type applications, cultural issues are very important. For example, there are lots of cameras in cars in Russia because there is a lot of insurance fraud, so people use cameras to protect themselves. In the US, it seems that you can’t use Google Glass in a cinema as a recent news story revealed that someone using them was arrested! Social norms will be different, but Gray doesn’t see big consumer volumes for smart glasses in the short term.

Display size tends to get bigger as the time spent looking at them increases, so if the display is small, it is only good for a glance. Furthermore, there is no “perfect” wearable technology – all the current products have some problem or drawback.

Gray said that when he visited the LG booth, all the visitors were looking at the round versions of LG’s watch and “nobody” was looking at the square ones. The watch industry knows how to make this kind of fashion-led product. Gray believes that there will be a “bulge of fashion” in the wearable market and then a long term market for very cheap health-related devices.

In conclusion, it’s about the software and wearables will need to interact with more than just a phone.