There are a lot of Apple Watches on the streets of New York and San Francisco — even if much of the world seems able to carry on without wearing their technology. Yet after a lull in the smartwatch category, experts said updates on existing models and new looks from more fashion brands could help change their minds.
The latest Apple Watch, the Series 3, has enjoyed positive reception so far. Despite early connection issues that affected some review units, GBH Insights analyst Daniel Ives remained enthusiastic about the wearable. As a standalone capable of working without a phone, it’s a “game-changer release,” he said, and it could allow Apple to “open up this wearables category for the coming years.” In the near term, GBH expects the watch to drive holiday sales.
It won’t tackle the market alone. The fashion world is taking up the wearable tech with its interpretation of smarter-looking smartwatches. The latest comes courtesy of two well-known brands: Today, DKNY launches its $155 DKNY Minute smartwatch, and last week, Tory Burch released its ToryTrack Collins lineup, starting at $250.
The collections, products of the brands’ relationship with watch company Fossil Group, represent their respective companies’ first foray into hybrid smartwatches — a category that blends the classic styling of analog dials with connected features like notifications, music control and activity tracking. The ToryTrack even puts a remote smartphone camera shutter on the wrist.
“Having one watch that has my music, a camera and an activity tracker is efficient and practical,” said Tory Burch, chief executive officer and chief creative officer. Her company has long been intrigued by wearable technology, having previously designed Fitbit accessories. Now that fascination fixes the brand’s discerning eye on a burgeoning smartwatch market.
That’s quite a switch in sentiment from the grim market predictions earlier this year. The tech sector had just seen makers — such as Motorola, Pebble, TomTom, Jawbone and others — either back off the category or sell their businesses. That, plus middling sales, prompted proclamations that the wearable tech was over. Fans of Android Wear, Google’s wearable-tech software, fretted over the fact that the company failed to make any major announcements about its wearable platform at its I/O conference in May. Then it overlooked the subject again at its Pixel 2 event last month where it debuted new phones, connected speakers, smart ear buds and other items — but no watches.
When Android Wear devices suddenly disappeared from the company’s online store, devotees feared the worst.
But looks can be deceiving. Googler Hoi Lam, a staff developer advocate, explained on Twitter that the web site changed to focus on the company’s own branded products, not to kill off or downplay the products. The tech company even invested “in custom store fronts with online retailers,” he tweeted.
In other words, the smartwatch is not dead.
“One way that we look at how things are being received are the units being activated by people, and we’ve seen very continuous growth,” said David Singleton, vice president of engineering at Google and lead for the Android Wear team. “The business is seasonal. You’d see the spike around the holiday season. But if you look at the trend over time, it’s very consistently going upwards.”
IDC wearables analyst Ramon Llamas believes the sector is having growing pains.
“The market is acting the way that we expected,” Llamas said. “It’s in transition, more so than we’ve seen in previous years, and a little more than we’ll probably see in future years.”
Despite a downturn in the third quarter of 2016 — when shipment volumes fell 51.6 percent year over year due to product and software launch schedules — total shipments last year reached 102.4 million devices. “We got to 100 million units rather quickly, shipped in one year,” he said. “That can’t really be sustained.”
Perhaps not, but it can stabilize, and the category appears to be doing just that.
Llamas has a theory, and it’s a theme both the technology and fashion sectors know well: Hot, new trends tend to attract knockoffs. But some are now dying out. “What’s bubbling up to the top are companies that can stick around, folks that would hit those best-of-breed devices and experiences.” In August, IDC said the global wearables market saw gains of 10.3 percent in the second quarter. And smartwatches jumped 60.9 percent.
Apple and Google have been driving the sector. On its own, Apple Watch has roughly one-third of the global market, and sales have been climbing compared to the previous year.
In September, Apple chief executive officer Tim Cook seemed overjoyed that the Series 3 sold out in some locations. “Here’s what we’re seeing right now,” he said at the time. “The watch with LTE — the Series 3 Watch — we are sold out in so many places around the world. And we’re working really hard to meet demand.”
The broader wearable market can also look forward to some good news. IDC forecasts 121.7 million shipments this year, representing a 16.6 percent increase from 104.4 million units in 2016. Gartner predicts that worldwide wearable sales will grow 17 percent, and Canalys estimates that smartwatches will get a boost in the second half of this year due to cellular-enabled devices like the new Apple Watch.
“For years, rudimentary fitness trackers have acted as a gateway to smartwatches and now we’re at a point where brands and consumers are graduating to a more sophisticated device,” Jitesh Ubrani, senior research analyst for IDC Mobile Device Trackers, said in a report.
Samsung, maker of the Gear Fit2 Pro, Gear S3 and upcoming Gear Sport, noticed the same sentiment. “Through our own research, we are also seeing consumers want more than just step counters,” said Shoneel Kolhatkar, senior director of product marketing. “They want their fitness bands to be smarter and their smartwatches to do more, which is what we are focused on delivering to consumers.” As processors and sensor technologies advance, so will features across the board. At a recent tech summit in Hong Kong, chip maker Qualcomm revealed that it’s actively working on a new, smaller smartwatch processor that can offer better battery life and improved sensors.
Even before such enhancements arrive, Llamas has been noticing warming reception among users. Today, there’s a wider array of pricing, a growing number of apps and more devices capable of running without a smartphone. And more models are targeting specific customer profiles, like outdoor enthusiasts and style-conscious consumers.
Cue the fashion industry.
While Silicon Valley hyperventilates over trends like artificial intelligence and virtual reality, the fashion establishment has taken up the growing, but less-hyped category it left behind. These days, more products seem to come out of fashion brands than technology companies — finally. Smartwatches, as body-worn embellishments, naturally seem to be an area of tech that needs some design flair.
After the initial rash of plain or geeky contraptions emerged in 2014, André Leon Talley, former Vogue executive editor, dropped in on a Dreamforce keynote. His words for the tech-focused crowd still resonate: “My state of the union report about the current state of wearable tech is — it’s terrible. I shouldn’t have to sacrifice form over function. It doesn’t matter that this gadget can organize my life and make dinner, if it’s just too ugly to look at … As a custodian of fashion, I ask, where is the fabulous in wearables? Most of the things I’ve seen just look ghastly. They look too much like technology,” he said.
It took a while, but the fashion world has locked onto the connected wrist — and some of the most enthusiastic purveyors are now being rewarded.
Fossil’s smartwatch shipments leaped to 1 million units in the second quarter, up from 300,000 a year earlier. Emboldened by that 217.9 percent growth, the watch company doubled last year’s wearables revenue this year. Now it’s on track to help unleash a slew of Android Wear watches on the market.
The lineup includes current and upcoming products going into 2018 featuring typical app-driven smartwatches and hybrid watches. The products extend across an array of brands: Fossil’s eponymous line and owned brands, such as Misfit, a wearable tech startup it acquired in 2015. Others include Michele, Relic, Skagen and Zodiac. Beyond its walls, the watch company also hatched licensing arrangements with Adidas, Armani Exchange, Burberry, Chaps, Diesel, Emporio Armani, Karl Lagerfeld, Kate Spade New York, Marc Jacobs and Michael Kors, in addition to deals with DKNY and Tory Burch.
According to Fossil, it was the first major fashion partner for Android Wear. Now it’s taking a veritable army of Android watches into the market, with the goal of taking the lead.
“You have to get three things right to be successful in wearables,” said Greg McKelvey, executive vice president and chief digital, strategy and marketing officer at Fossil Group. “[You need] tech-enabled functionality, beautifully designed and branded products people want to wear, and price.”
Tech’s players have arguably gotten the functionality down. Companies like Fossil can step in and put it together with the rest. “I’d argue that we are in the unique position to have branding and design right, the scale to drive the price down, and top-notch technology,” he explained.
More than 70 percent of Fossil’s traditional watch sales come from women shoppers. The company’s strategy is to bring the same aesthetic approach to its wearables business, but for both genders. “What excites customers are accessories that complement their personal style,” McKelvey added. “They do not necessarily want a laptop on their wrist.”
Fossil has another licensing deal with Michael Kors, which has been busy evangelizing its Android Wear devices. Last month, the luxury fashion brand launched a 360-marketing campaign in New York featuring its latest Access Sofie watch and the Google Assistant. The Access watches are an important and growing product line for the design house. “In Q1 2018, consumers continued to respond well to the increased array of styles, platings and interchangeable strap options,” said John Idol, chief executive officer for Michael Kors.
The male-oriented Grayson and the female-friendly Sofie are the brand’s new Access styles for fall, and Idol expects them to “help fuel our growth of smartwatches, which we anticipate will reach 25 percent of our overall watch sales by year’s end.”
Fossil’s substantial effort and investment in connected timepieces may be rare, but the company’s hardly alone in this space. Louis Vuitton, Movado, Mont Blanc, Hugo Boss, Tommy Hilfiger, Guess and Tag Heuer have all partnered with Google on their own Android Wear watches, which now come in an array of styles. These join Hermés and Nike, which struck deals with Apple to create special versions of the Apple Watch, and Tumi, which developed a special luxury edition of the Samsung Gear S3 Frontier with the South Korean tech giant.
Paying luxury prices of several hundreds or thousands of dollars could seem like overkill for a smartwatch, but it’s important to note that, as a product category, overall pricing is not moving linearly up or down. It’s moving in both directions simultaneously, expanding the choices on both the high and low end. There are plenty of less expensive options — including some of Fossil’s devices priced at sub-$200 levels, as well as the Apple Watch Series 1, which now sells for $249.
When asked about prices, Google’s Singleton turned the conversation to value: “When you think about price, tremendous value is in how people can express their style and what they can do. The top joys we hear from customers are that you can choose any watch face, you can choose information that you care about. When they choose their next calendar appointment, they can see it right there. It’s the ability to stay connected to people, but keep the phone in the pocket.”
The price people are willing to pay for those features can vary greatly from one consumer to the next. Now many of those decisions will be driven by fashion industry professionals with deep expertise in understanding what their customers actually want.
And it’s not a mini laptop strapped to their person.
“It’s interesting, talking to some of these partners… some want to tap the market with something more affordable,” said Singleton. “Even for a luxury brand, [that big price] could be the cheapest in their range, and it may work for their clientele, who is happy to spend that for a good watch that works well for a few years.”
And by the time the latest crop of luxe smartwatches starts to fade, the market will have reset, with new functionality, new looks and new reasons to buy. In that way, technology has helped fashion circle back to one of the core tenants of its business — that shoppers are looking for something new.