IFA Show Breathless Growth in Digital Fitness Gadgets

The next generation of smart watches and fitness trackers will be in focus at IFA, Europe’s largest consumer electronics trade show, which kicks off this Friday in Berlin. Global demand for digital health gadgets is surging, but it's a tough market teeming with competitors.
A Fitbit launch in New York. Wearable fitness trackers are all the rage.

Storm warnings usually come from the weatherman. Now they also come from the weatherman on one’s wrist.

Thanks to its built-in barometer, Samsung’s Gear 3S smart watch gives consumers the ability to track air pressure changes themselves. Equipped with GPS, it also offers hikers and mountain climbers added safety protection in case they get lost in remote areas.

The Korean electronics giant unveiled the latest version of its smart watch on Wednesday in Berlin in advance of the IFA consumer and home electronics trade show. The six-day exhibition of next-generation digital devices, Europe’s largest such event, kicks off Friday.

It is imperative for companies to differentiate themselves and to be known for something in particular, instead of being one of many. Ramon Llamas, Analyst, market research firm IDC

Samsung’s Gear 3S is part of a growing trend in wearable electronic intelligence, in which the makers of smart watches, fitness trackers and other such wearables are adding ever more specialized functions – from elevation measurement for climbers to breathing instructions for meditation.

Manufacturers face multifaceted competition from a variety of sectors, including developers of smart phones and makers of conventional watches that are branching out. But they also have to contend with inconsistent consumer interest. A number of recent surveys indicate that fitness trackers, for instance, often land in the junk drawer after an initial period of excitement.

“Wearables are becoming ever more similar, at least in terms of functionality,” said Ramon Llamas, an analyst at market research firm IDC.

This is the case for most fitness trackers and smart watches, which typically measure steps, calculate distances and in the future will measure heart rate.

“It is imperative for companies to differentiate themselves and to be known for something in particular, instead of being one of many,” Llamas said.

IFA attendees will hardly be able to escape wearables. And no wonder: Despite a lack of differentiation, the market is growing steadily. IDC estimates makers of wearable devices will sell more than 100 million units this year for the first time – including 50 million electronic bracelets and some 40 million smart watches. Other digitized products such as clothing and glasses account for the rest.

The market outlook remains robust for the coming years, with IDC forecasting an average annual growth rate of 20 percent to 2020.

 

01 p20 Smartwatches-01

 

What the numbers do not illustrate is just how fierce the competitive landscape has become, populated by companies fighting for market share with high-tech gadgets for weight-conscious consumers and those who simply want to be seen with a savvy smart watch.

There are pioneers like Fitbit and Jawbone that first introduced modern step counters, and smart phone innovators like Apple and Samsung that have launched smart watches as the next big thing. There are navigation systems specialists such as Garmin and Tomtom, and traditional watchmakers seeking to maintain their clientele.

Consolidation is already under way in the fitness-tracker segment. Startup Misfit now belongs to watch stalwart Fossil, while Nokia absorbed French firm Withings, and even Jawbone is reported to have put itself up for sale in the face of financial challenges.

“The various categories are merging with each other,” said Timm Lutter, an expert at high-tech trade group Bitkom.

Manufacturers can distinguish themselves from each other with design and technology, he said, as well as functionality and clever data analytics.

Market leader Fitbit – which is launching two new models at IFA – fits the profile for success. Its discreet Charge 2 device, unveiled on Monday, includes GPS, cardio fitness readings and several simple breathing exercises to relax one’s pulse – whether for fitness or nerves. It is also a simple wristband appropriate for work attire or a cocktail party.

With such multi-dimensional devices, the U.S.-based company nearly doubled its sales in the second quarter of this year to $587 million (€525 million).

Despite this success, Fitbit has its work cut out to keep pace with discount rivals like Xiaomi and Huawei, and sellers of smart watches that also serve as fitness products, such as the Apple Watch.

Fitbit investors are so alarmed over the competition that its share price has shed nearly half its value since the start of the year.

Rather than taking a multi-functional approach, Dutch electronics company Philips has honed its strategy to focus singularly on health. Its smart watch, launched last year at the IFA expo, is classified as a medical product. Its measurements and algorithms have been clinically validated.

The Philips Watch constantly measures heart rate and tracks calorie burn during walking, running and cycling. It also tracks sleeping patterns, highlighting respiration and oxygen intake – factors that help to estimate lifespan.

“With our products we are not targeting people purely interested in improving their fitness,” explained Pieter Nota, a Philips executive responsible for consumer lifestyle products.

Rather, the company is focused on health-conscious people of a certain age. “People at least 45 years old, who actually are healthy, but maybe belong to a risk group – for instance, because they have too much work stress,” Mr. Nota said.

Philips hopes to differentiate itself with its Health Suite software platform, which offers a medical analysis of the data and health advice.

Finnish mobile network equipment maker Nokia jumped into the wearable device market with its €170 million ($190 million) purchase of Withings this year. Like Philips, the French startup also targets health care.

“Our focus, together with Nokia, is on health monitoring and lifestyle improvement, and to offer products that go beyond sport and fitness tracking,” Withings chief executive, Cedric Hutchings, told Handelsblatt. “We don’t just want to offer products,” he added, “but an ongoing service.”

Whether lifestyle or health, however: the customer always has the last word.

“It’s a question of whether or not consumers find value in the new functions,” cautioned Mr. Llamas, the IDC analyst.

After all, many hikers with the weather app on their cell phone probably do not need a barometer on their wrist.

Joachim Hofer covers the high-tech industry and IT sector for Handelsblatt. Christof Kerkmann is an editor for Handelsblatt Online and writes about the technology sector. Maike Telgheder is an editor at Handelsblatt, covering the health economy, pharmaceutical companies and chemistry.  To contact the authors: [email protected][email protected], [email protected]