Garmin (NASDAQ:GRMN) is the de-facto standard watch product for a lot of athletes. If you're a long distance runner, triathlete, swimmer, or any kind of endurance athlete, you probably know Garmin's products well. The company has made the best GPS watches on the market for years, and it's known for the durability athletes require. And a big part of Garmin's business is dominating this very specific niche of watches.
Apple (NASDAQ:AAPL) may have just crushed Garmin's watch business with the new Apple Watch Series 3. It does everything Garmin does -- and more. A lot more.
Apple just blew Garmin out of the water
What Garmin has always done better than competitors like Fitbit (NYSE:FIT) and early Apple Watches is make a durable product that was easy for athletes to operate. It had accurate GPS and easy readouts for the information you needed while doing an activity. Bells and whistles like receiving emails or text messages were available for some models, but didn't offer great functionality and weren't a core reason customers bought a Garmin in the first place.
Apple Watch Series 3 takes everything great about the Apple Watch -- fitness tracking, text messaging, Siri, email, apps, and more -- and overlays all of the functionality of a Garmin Watch. It will even play your music on AirPods, eliminating the need for a clunky arm band.
The kicker is that the Apple Watch adds cellular connectivity to the watch, allowing communication and tracking on Find My Friends, making your iPhone unnecessary, even on race day.
Products like the fenix 5 multisport watch will see particular pressure. It starts at $599, exceeding the $429 for the largest Apple Watch Series 3. A watch like the vivoactive 3 starts at $299 and has Garmin Pay and lets a user view emails or texts. But its user interface doesn't come close to matching Apple and it requires a smartphone to access full functionality.
Apple's capabilities on Apple Watch Series 3 and the reasonable price point starting at $399 will be tough for competitors to match.
The hit to Garmin's finances
Watches aren't 100% of Garmin's business, but it's a big chunk of the business and one of the few bright spots in the product portfolio. Outdoor and fitness revenue is dominated by watches and accounted for 46% of revenue in the second quarter of 2017, growing 9% year over year. The rest of the business shrank by 5%.
If watches in Garmin's product line are put under pressure by the new Apple Watch it will be a huge blow to the company's operations. Auto GPS products are already shrinking and outdoor and fitness watches were Garmin's one massive growth market. I would even argue that the company had built a clear lead in the athlete niche over competitors like Fitbit, who was trying to move up market into endurance sports watches. Apple just blew that strategy away.
Apple may have killed Garmin's best chance for growth with one product introduction. And as a user of both a Garmin fenix watch and an Apple Watch, I wonder how long it will be before my Garmin watch starts collecting dust.