2017/03/22 Hybrid Smartwatches Sales to Double in 2017

Hybrid smartwatches led by traditional watch makers is about to witness a breakout year and register stellar growth thus contributing to positive growth for the stagnant smartwatch segment.

The smartwatch segment hasn’t been able to live-up to the early hype created around it, failing to achieve the expected sales growth in 2016. However, the smartwatch market is about to witness momentum this year in majority aided by “hybrid smartwatches” category. As per Counterpoint’s latest research, the hybrid smartwatch segment will cross US$ one billion mark in revenue in 2017, almost doubling annually.

Exhibit 1: Revenue Growth of Hybrid Smartwatches Segment

The Hybrid smartwatches look and function like traditional analogue watches to the naked eye, but include smart features like step tracking, heart rate monitor, notifications and even NFC enabled payments. They connect to smartphones through dedicated apps available on iOS and Android stores allowing users to use the watch with traditional look and feel with smart functionalities.

Commenting on the potential of hybrid smartwatches, Counterpoint’s analyst Mudit Singh notes, “With sales of traditional analog watches under pressure from the likes of Apple and Samsung, luxury traditional watch brands such as Fossil Group, Tag Heuer, Citizen group and others, are turning to hybrid smartwatch form-factors to get a share of the smartwatch pie leveraging their core competency “design and craftsmanship”. Wearable tech brands including Garmin, Misfit, Withings (now, Nokia) among others are also now adopting the hybrid approach to enable greater battery life and drive usage as well as user experience”.

Mr Singh, further notes, “The rise of hybrid smartwatches can be attributed to traditional watchmakers trying to address two key pain points which has held the smartwatch segment growth – Firstly, preserving the traditional, aesthetics style, look and feel, secondly, maximizing the battery life while retaining ‘meaningful and frequently used’ smartwatch features”.

Exhibit 2: Share of Hybrid Smartwatches of the Total Smartwatch Segment.

Commenting on hybrid smartwatches growth, Counterpoint’s Research Director, Peter Richardson added, “Hybrid smartwatches sales volumes will grow 77% annually taking the penetration to 12% of the total smartwatch volumes in 2017. Major focus on hybrid smartwatch segment by traditional watchmakers will drive this growth. For example: Fossil group launched almost 100 SKUs of wearables in 2016 including popular hybrid models such as the Skagen Hagen Connected, Misfit Phase, and Fossil Q series. The US watchmaker aims to triple the number of SKUs in 2017, with majority of those being hybrid smartwatches. Though the number of SKUs seems high, Fossil Group is able to hit multiple market segments with finely gradated offerings, but likely with similar or the same underlying technology solution to gain scale. This form of product marketing is something Fossil does well; much better than technology companies.  And with Baselworld-2017 around the corner, big announcements are expected from Citizen group and Fossil’s band of brands.”

Market Summary

• Hybrid watches will grow exponentially in 2017 and will penetrate almost 12% of the smartwatch market.
• More traditional watchmakers along with tech wearable makers will shift towards hybrid watch.
• The wholesale revenue of the hybrid watch market in 2017 will double from the previous year, crossing a Billion$ mark.
• In 2017, Fossil group will dominate the hybrid watch market with their plan to launch 300SKUs by the year end.
• AI enabled hybrid watches will also be on rise, with the trend having already been adopted by brands like Martian and Guess.
• The hybrid watches have strong potential to compete with smartwatch as it addresses key pain points while not compromising on aesthetics. We estimate them to capture almost one quarter of the smartwatch market by mid-2018.