Smartwatches Hot, But Lack Killer App

Smartwatches have moved the devices on one’s wrist beyond merely telling the time, but they’re going to need to be less tied to a smartphone, and show a clear purpose to really take off.

According to The NPD Group, nearly half a million smartwatches have been sold in the United States since last October (with a third of them coming during the holiday shopping season), accounting for $96 million in revenues. Samsung’s Gear watch dominates the market, with 78% revenue shared, followed by Pebble, which has an 18% revenue share. 

Given Samsung’s global size, reach, brand equity and experience in the mobile category, it’s not surprising the company dominates the smartwatch category. Pebble, meanwhile, has built its presence through the tech-savvy and crowd-funding early adopters. 

“The way I look at Samsung’s dominance over a start-up like Pebble is thinking about Samsung’s wide distribution- in multiple countries and outlets and partners,” Ben Arnold executive director of industry analysis at NPD, tells Marketing Daily. “Pebble is still building up its sales network.”

The category is only poised to grow, according to NPD. A fifth of all consumers say they’re interested in buying a smartwatch, with intentions skewing high among younger demographics (30% of 16-24 year-olds, for instance, expressed interest). However, for the devices to expand beyond niche appeal, the makers are going to have to give people a reason to purchase them, Arnold says.

“In the next few years, it will be important for smartwatch manufacturers to find a killer app for the device,” Arnold says. “Right now, smartwatches as we know them have some fitness functions, they have access to a few apps and services but for some consumers that might not be enough to necessitate a whole new product investment.” 

The biggest hurdle to adoption is price. Promotions and new entrants have caused average prices to fluctuate, with a high of $257 and a low of $160. Because the largest maker, Samsung, has bundled its Gear watch with Not and Galaxy smartphones, the average cost for a smart watch is $189, according to NPD’s Weekly Tracking Service. 

“I think consumers are still trying to decide what they would do with a smartwatch,” Arnold says. “The products have only been on the market a few months, so consumers are still learning about them and companies are still trying to decide where in the market they can capitalize.”

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