Fitbit Brings Wearables to the Masses with the Launch of Cheaper Devices

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2Q 2019 | IN-5440

With the release of a new range of cheaper wearable products, Fitbit is aiming to encourage a greater number of consumers to begin using a wearable. The company is looking to attract more consumers to its 27 million worldwide customer base by diversifying its offering, with the aim of increasing both the total addressable market for the devices and its market share of wearables. By offering a cheaper range of devices, Fitbit expects to encourage a greater number of consumers to purchase their first device, with the potential to then upgrade to a more expensive device with a larger number of features in the future.

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Fitbit's Aim to Bring Wearables to New Consumers

NEWS


With the release of a new range of cheaper wearable products, Fitbit is aiming to encourage a greater number of consumers to begin using a wearable. The company is looking to attract more consumers to its 27 million worldwide customer base by diversifying its offering, with the aim of increasing both the total addressable market for the devices and its market share of wearables. By offering a cheaper range of devices, Fitbit expects to encourage a greater number of consumers to purchase their first device, with the potential to then upgrade to a more expensive device with a larger number of features in the future.

Wearable vendors, such as Fitbit, often update their offerings with different devices to ensure they are adopted by a wide range of consumers, catering to those who require smartphone notifications, healthcare monitoring, waterproofing, and more. Having a range of devices allows a company to offer relatively cheaper devices in its portfolio that concentrate on certain individual features to cater for different consumers, increasing the total addressable market. This is what Fitbit is aiming to achieve with its latest lineup of wearables.

Fitbit's Updated Wearable Offering

IMPACT


Specifically, Fitbit has released four new wearable devices, ranging from smartwatches to activity trackers for children, across a variety of lower price points with the aim of appealing to a wider range of consumers. These devices include:

  • Versa Lite Edition – The Fitbit Versa Lite Edition is a cheaper alternative to the Fitbit Versa smartwatch, featuring automatic activity tracking, 24/7 heart rate tracking, sleep tracking, goal-based exercises, GPS, notifications, a blood oxygen saturation (SpO2) sensor, and four days of battery life. The device is available for US$159.95, compared to the standard Fitbit Versa, which is US$199.99.
  • Inspire HR – The Fitbit Inspire HR is a 24/7 heart rate tracking device that tracks the same information as the Versa Lite Edition, but without the SpO2 sensor and notifications and with five days of battery life. The device is available for US$99.95. The Inspire HR was first introduced to enterprise customers in the United States, such as Adobe and Domino’s, for 2019 health plans such as Humana, a health and wellbeing company that uses Fitbit devices to encourage its members to adopt healthy behaviors to prevent or manage chronic conditions. Partners such as Limeade, Solera Health, and Vitality Group have also incorporated their healthcare needs via the use of Fitbit devices.
  • Inspire – The Fitbit Inspire is a cheaper version of the Fitbit Inspire HR. It does not feature heart rate tracking and is available for US$69.95, a full US$30 less than the Inspire HR.
  • Ace 2 – The Fitbit Ace 2 is designed for children aged six and higher, features a swim-proof design, screen protector bumper, animated clock faces, and activity challenges, and is available for US$99.95. A Fitbit family account must be set up by the parents to allow them to track the Ace 2’s activity data, which is uploaded via Bluetooth.

The company is also updating a variety of other features in its wearables offerings. In 2Q 2019 Fitbit will release Sleep Score, which takes various sleep metrics to provide users with an assessment of their data as, according to the Centers for Disease Control and Prevention (CDC), over 30% of American adults do not get the required amount of sleep and are therefore at risk of cardiovascular issues. The company is also updating its smartphone application with Fitbit Focus, which will add further insights, messages, tips, and personalization, while also supporting customers in 80 new markets in Asia, Europe, and Latin America with nine new languages. Fitbit has also announced a Rewards beta program, which is testing new ways to motivate users to reach their goals by offering points for steps, sleep, and active minutes that can be redeemed for discounts on products from Fitbit, Adidas, Blue Apron, and Deezer. The company has also released Fitbit Care, a program for employers and health plan providers.

How This Fits in with the Wider Wearable Market

RECOMMENDATIONS


The wearable market is continuing to grow, creating a large opportunity to bring smartwatches, activity trackers, and other wearable devices to an increasing number of consumers. The wearables market is expected to see shipments increase from 239 million in 2018 to 460 million in 2023, representing a compound annual growth rate (CAGR) of 14%. Other wearable companies are also updating their offerings to include a number of devices that cover a wide range of prices and features in a similar way to Fitbit, showing an awareness that the market is still progressing and is not yet saturated. Companies such as Withings, Garmin, Samsung, and Huawei have all announced updates to their wearable lineups, adding a greater number of features, particularly related to healthcare tracking, to their smartwatches in order to cater to a variety of customers, both current and new.

Fitbit’s aim is to bring a wider range of devices, both smartwatches and activity trackers, to the market in order to increase its market share and to develop a larger total addressable market. Fitbit shipped nearly 14 million devices in 2018, taking a 14% share of the smartwatch and activity tracker market. While a larger portion of the company’s shipments came from activity trackers, its share of that market dropped from 29% in 2017 to 16% in 2018. Fitbit is therefore continuing to increase its focus on the smartwatch market, which is seeing a greater increase in shipments overall, by offering devices with different features at a range of prices, often much lower than other smartwatch vendors.

Fitbit’s cheaper device offerings open the door for many consumers who have been reluctant to purchase a wearable to now justify doing so, increasing the company’s addressable market. These devices are designed to be the primary devices for new customers, which Fitbit hopes will create brand loyalty even though consumers often focus more on features and price than brand when making a purchase decision. Fitbit then hopes that consumers will replace their devices after a year or two with a more expensive wearable with an increased number of features. Fitbit is also aiming to encourage more consumers by adding a greater number of features to its applications and services, offering more personalization, more data, and a rewards program.

Other wearable vendors looking to update their offerings in a similar way to Fitbit should consider developing a range of devices for different budgets that provide different features. If the prices can be dropped far enough in the future, it is likely that the gift market for wearables will increase in size, creating additional shipment growth in the sector. It is important that these vendors are able to handle the increased scale of production with these different devices while also ensuring that they do not dilute their offerings. It is worth focusing on one type of wearable, such as smartwatches, and offering models with different scales of features at different prices like the approach Fitbit has taken with its range of smartwatches and activity trackers. Differing form factors, sizes, device types, and price ranges will ensure that companies can cater to a larger number of consumers, potentially increasing their share of the market and the size of the market overall. This will benefit all wearable companies, including Fitbit, as there will be a larger number of consumers looking to purchase and, ultimately, upgrade their devices. It is, however, unlikely that all companies in the sector will consider adding a line of cheaper devices to their wearables offering—for example, Apple’s Apple Watch is its only line of smartwatch, within which it has different versions with varying screen sizes, connectivities, and brand collaborations with companies like Nike, all of which are regularly updated with new features. Apple can command a relatively high price by relying on its brand loyalty and product quality without entering into price competition with other companies.

Wearable vendors also need to be sure to consider what consumers are demanding from their devices, notably healthcare tracking features, as well as what their competitors are providing and at what price levels to ensure that they are popular within the market. This helps ensure that a company’s overall offering includes various device types that meet different user requirements, both in terms of cost and segment (for example, age), and have a mixed level of features. Continuously updating apps, software, and other features in line with updating hardware is also recommended. It ensures that devices are kept up to date and provide consumers with the increasing amount of information they are demanding from their wearables to track their overall health and fitness levels. For example, Fitbit has also announced updates to its applications, ensuring that new features are available to existing customers, with the aim of improving brand loyalty and maintaining a strong market share. 

However, while there are benefits to be had by all in the sector as the total addressable market grows, the ability to keep margins healthy may prove to be more challenging as these cheaper models flood the market. Any continuous race to the bottom in terms of price could see some vendors pushed out of the wearables market altogether, or else the sector may witness further consolidation. For the time being, Fitbit has created a product strategy that should help consolidate market strength across device types, but that could also be easily replicated by its counterparts (with the probable exception of Apple), so the company needs to continue to create brand loyalty and deliver improved experiences if it is to stay competitive and thrive in the sector.

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