Fitbit announced on Monday that it will lay off 110 employees and warned investors of lower than forecasted revenue. Fitbit continues to do well, but it is falling short of the inflated expectations of the market. Some of the hype is Fitbit's own doing: The investors needed to take the company public during a window of opportunity when pedometers were hot, but smartwatches weren't -- yet.
Forrester Research is still bullish on the wearables market overall. Forrester forecasts that consumer adoption of wearable devices will grow from 18% of online consumers in 2015 to 29% in 2021. While pure fitness wearables dominate the market today, they will decline as a percentage of total sales. Only seven percent of consumers had a smartwatch in 2016. By 2021, over one-third of the 46 million wearables sold will be smartwatches.
When consumers buy connected products today, they expect an outcome. With fitness wearables, for example, it could be weight loss, more activity or a healthier lifestyle overall. But data on its own will not change consumer behavior directly -- it's the insights that apps derive from data that can fuel engagement with consumers, and will help them achieve their goals or desired outcomes through better decision-making. Too few wearables offer apps that utilize effective mechanics, such as gamification, competition, community, coaching or support.
Key drivers of growth for wearables include: falling price points, improved UI's, consumer accountability for the cost and outcome of healthcare, expectations of improve employee productivity, and lower abandonment rates that drive repeat sales. On the other hand, there are several inhibitors of growth, including that:
- Wearables are not an essential product for consumers (at least yet). Notifications, payments, sleep tracking, and heart beat exchanges are fun and convenient but not yet essential.
Because of these issues, smartwatches are missing killer apps and are not yet must-have devices. Without these five applications -- notifications, payments, voice assistants (and chatbots), identity, and health -- smartwatches will not be indispensable.