Wearable fitness tracking devices continue their strong run. According to figures from tech researcher IDC, the 34.2 million wrist-worn units shipped in the second quarter of 2019 was a 29% year-over-year surge, and the analysis expects global shipments to notch about a growth rate of about 8% a year through 2023. That would put annual fitness trackers and wearables sold at over 300 million.
The expected growth of the industry helps explain why Alphabet's (GOOGL 0.66%)(GOOG 0.70%) Google is trying to make the controversial Fitbit (FIT +0.00%) takeover -- even though the small wearables pioneer has been getting steamrolled by cheap competition from China and the premium Apple (AAPL 0.16%) Watch series. However, selling devices is only part of the story. Fitness trackers are viewed as a gateway to the global multitrillion-dollar-a-year healthcare industry, and tech companies still have a long way to go to convince consumers their wearables are as necessary as their smartphones.
Consumers and fitness trackers aren't exactly inseparable
A recent survey from analytics firm Gallup shows that 19% of Americans are currently using a fitness tracker. With a population of over 330 million, that's a pretty big customer base -- implying that some 60 million people in this country alone are users of Apple, Fitbit, and other tech companies' smartwatches and fitness wristbands. Nevertheless, given how strong sales have been in this category in recent years, that figure isn't totally surprising.
Here's where things get interesting, though. When expanding the survey to those who pair their fitness tracker with an app that tracks their health statistics, the figure drops to only 10%. Additionally, another 15% of respondents said they tried a fitness tracker in the past and 13% said they tried a fitness app -- but aren't using them any longer. Two-thirds of those surveyed have never tried either.
A couple of interesting conclusions come from this study: First, fitness devices and apps are still nowhere near mainstream in the country that pioneered them; and second, tech companies are losing a significant number of users. Gallup's study doesn't delve into the reasons why, but there are some hints.
One could be simple demographics. The number of users is highest among young adults (read millennials) and households earning over $100,000 a year. Big tech is finding it most difficult to convince older generations and lower-income households to shell out their cash and time for health devices and apps.
But what about those who have used a fitness tracker before and are now opting to leave them at home? Gallup says about 30% of respondents who have used the products in the past find them "very helpful," while about half said they were only "somewhat helpful." That, in my mind, explains why so many are bailing on the connected health movement.
Image source: Getty Images.
Wearable makers have some work to do
Perceived usefulness is obviously a big problem that needs to be solved, but that could be a bit more complicated than simply loading up a smartwatch with features. Form factor -- or how the device feels or looks on the wrist -- is one problem (and the main reason this millennial stopped wearing one). So is overall experience with the app the device connects with.
They're problems worth solving, though. Obviously, a lot of people who have yet to even put on a fitness tracker could become loyal customers. Apple has proven that some will be willing to pay hefty prices for the devices. IDC estimated that the Apple Watch's average selling price was $448 in Q2 2019. Going deeper than that, though, disrupting the status quo in healthcare is the real long-game. Apple and Fitbit both have and are working on health divisions, developing software and services for the industry (health providers and insurers) as well as users and patients. With spending on healthcare coming in at $3.6 trillion in the U.S. in 2018 (or over $11,000 per person), just a small slice of that pie would be game-changing -- even for a tech giant.
Thus, Google's $2.1 billion bid for struggling Fitbit -- which is trying its hardest to get wearers to sign up for premium services and set up other healthcare-industry-related businesses -- makes sense. This connected healthcare movement is only just beginning to take shape and could be a really big deal in another decade's time.
