THE BLOG

Wear and Tear: Will Wearables Survive 2016?

11/12/2015 10:04 GMT | Updated 09/12/2016 10:12 GMT

Apple has a proven track record of entering already-established marketplaces and building up serious dominance. And with our data showing that close to 50% of smartwatch owners in the US and UK have opted for an Apple Watch, this seems to be a case of history repeating itself.

However, there's still a big problem here. Apple might have become a leading name among the pool of smartwatch owners, but it's a pool which remains very small. That almost 10% of internet users globally now say they have a smartwatch might sound pretty decent for a device still in its nascent stages, but ownership is still pretty low in many key developed markets like the UK (4%), Australia (6%), Canada (4%) and Japan (2%). In fact, the higher global figure is being driven largely by stronger ownership rates in many Asian markets - with names like Hong Kong, Singapore, China and India all posting numbers of 10%+. That their internet populations tend to be relatively young and affluent is one reason for this, but so is the fact that the smartwatch market in APAC has been flooded by low-end options which cost as little as 20 USD. If we take China as an example, a site like Taobao now has a huge range of smartwatches available, and at all sorts of price-points. So, global progress to date for high-end smartwatches has not been as solid as the headline figure might first suggest.

Months after the launch of Apple's high-profile and long-awaited wearable, premium smartwatches remain anything but mainstream. The Apple Watch might have given us a glimpse of how ultra-convenient the smartwatches of the future are likely to be, but it has failed to become a must-have device. Quite simply, most consumers are yet to be convinced that they need a smartwatch.

It's the demographics of ownership which are particularly concerning here. Currently, 25-34s are in the lead, being a group with a developed interest in tech as well as the disposal income necessary to invest in premium but non-essential devices. In contrast, 16-24s might be at the absolute forefront of smartphone usage but many are finding themselves priced out of the smartwatch market. This expense factor becomes particularly clear if we examine ownership by income: the top quartile are over twice as likely as the lower one to have invested in a smartwatch.

As another relatively premium but non-essential device, tablets offer one of the most useful comparison points here. It's certainly encouraging that about 45% of internet users now personally own one, showing that there's a huge potential audience for smartwatches to exploit. However, the expense of tablets means that they never seriously enthused 16-24s; uptake was driven by older groups and it's surely pretty telling that 55-64s are now more likely to own one than the youngest consumers. In short, tablets had so much success because they managed to establish serious appeal among older age groups.

The current situation for smartwatches is poles apart from this: 45-64s are barely engaging with them. Even if we allow for older consumers traditionally being late to adopt new tech, the figures remain remarkably low (rewind the clock a few years and tablets had already made much greater headway among these older consumers). The core problem for smartwatches is that their most natural user-base - 16-24 year-olds - are exceptionally heavy smartphones users and either can't afford or simply don't want a smartwatch.

Of course, 2016 will bring some progress. There's a new version of the Apple Watch on the horizon, which will tempt some existing users to upgrade and bring others into the market for the first time. The advice from many to wait for the second edition of such a groundbreaking device might well lead to a small spike, as will the fact that many of those who upgrade will sell their existing devices on the secondary market. Worth noting too is that competitors are upping their game, with the latest release from Huawei arguably being one of the most stylish smartwatches to date.

There's also the intriguing prospect of a second-edition Google Glass device. Although v1 failed to make the impact that some had hoped, it was still 1 in 4 internet users in the UK and US who said they were interested in using Google Glass in 2015. With a refined and less-expensive model in the pipeline, this could generate another small boost in terms of engagement with wearables.

Undoubtedly, the entrance of Apple into the wearable tech market this year effectively altered its landscape, and some would say it kick-started its revolution. But don't expect this revolution to gather too much pace in 2016. Yes, we'll see the ownership figures rise. And yes, smartwatches will continue to get better and better. But until they start doing lots of things in seriously superior ways to smartphones, or become much more affordable, they will struggle to move beyond their niche status.