Ralph Lauren (NYSE:RL) isn't a name most associate with wearable technology. This week, the apparel retailer revealed it's trying to change that. In step with the 2014 U.S. Open, Ralph Lauren will test the "Polo Tech" shirt on several of the tournament's ball boys, along with collegiate star Marcos Giron. David Lauren, the company's executive vice president of global advertising, marketing, and corporate communications, says the company is "excited to help lead the industry in wearable technology in this ever-evolving, modern world."
So, just how big is the market for smart-apparel in comparison to the rest of the wearables industry? And can Ralph Lauren's new product have a material effect on its finances?
The market for smart shirts
It's no secret wearables have the potential to be one of this generation's most disruptive technologies. Fellow Fool Alex Dumortier explored the possibility a couple of months ago. Estimates of the industry's exact size vary, though all are enormous. BCC Research reports the space is worth $9.2 billion this year, and forecasts its value could surpass $30 billion in 2018. IHS projects sales could be over $50 billion by 2018 in a best-case scenario, assuming wearables gain mainstream acceptance from consumers and marquee brands.
After medical monitors, entertainment devices, and military and industrial applications, smart-apparel accounts for a small, but promising segment of this market. IHS estimates global shipments of performance monitors, which range from products like Fitbit to the Polo Tech shirt, will hit close to 60 million units by 2018 -- a total value of over $2 billion. That's up from around 40 million units in 2013. When sales of micro-electro-mechanical systems are included, this forecast could stretch to at least a few billion dollars more. The microsensors, known as MEMS for short, can be used in everything from car airbag systems, to medical devices, to clothing.
How does Ralph Lauren's product work?
Ralph Lauren's smart shirt incorporates what appears to be MEMS technology, most notably a miniature accelerometer and gyroscope, into its design. With help from a partnership with Canadian start-up OMsignal, the Polo Tech shirt uses built-in sensors to track the wearer's heartbeat, breathing, energy output, and stress level, among other biometrics, the company explains. This information is then transmitted to a linked Apple iOS app. (A Google Android version is possible in the future, Engadget reports.)
Although the shirt will center around athletes at first, David Lauren believes it can appeal to the casual user, too. "Our vision is that this will transcend sports to help us at every age and in every aspect of life," Lauren said. "Reaching far beyond just the needs of elite athletes, Polo Tech will offer innovative technology for all ages and lifestyles to promote general wellness and quality of life."
How much money can it make?
If smart shirts eliminate the need for smart wristbands, considered more restrictive by some, Lauren's view could be spot on. But what's really special about the Polo Tech shirt isn't its innovation. It is the company's first-mover advantage.
Ralph Lauren is the first luxury brand to enter the wearables space. And while the Polo Tech shirt could've been influenced by Under Armour's "Armour39" system, unveiled last year, the two hardly compete for the same type of customer. Ralph Lauren's brand appeals to an older demographic compared to products that feature the "UA" logo, and any from Under Armour's peers who could enter the market next. Nike, for example, holds a patent for its own smart shirt, while Adidas' advancements in performance monitors makes it seem a foregone conclusion that some wearables will one day don three stripes.
Ultimately, a lack of high-end opposition means Ralph Lauren could make millions. A mere 1% share of the $2 billion smart-apparel space is $20 million per year; a 5% share is $100 million. The company generated retail sales of $3.8 billion last fiscal year, so any additional revenue from wearables has a good chance to be material.
In terms of traffic, Ralph Lauren has held as much as 39% of the luxury online shopping market in the past, according to Experian. Internet preferences aren't the perfect proxy for consumers' interests in smart apparel, but the company's dominance in that corner of the tech world shouldn't be overlooked.
What about investors?
At the moment, the price point is unknown, and it's also not clear if Ralph Lauren will sell its sensors -- which are removable -- separate from the smart shirt. Given the potential, though, that this product could become a market-leader once it hits stores, shareholders should pay attention.
With stiffer competition, revenue growth lagging industry norms, and pessimism getting the best of many investors, the company's latest product is a reminder that wearable tech innovation isn't just happening in Silicon Valley. Ralph Lauren, too, can be nimble and inventive. Those qualities typically aren't associated with the Polo logo, though that may change very soon.
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Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), Nike, and Under Armour. The Motley Fool owns shares of Apple, Google (A shares), Nike, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.