Apple (NASDAQ:AAPL) takes a tight-lipped approach to development products until the company's ready for the big, flashy unveiling. But The New York Times ran a profile of CEO Tim Cook this week that all but officially confirmed a smartwatch release later this year, which the rumor mill has nicknamed the iWatch. Samsung (NASDAQOTH:SSNLF) currently dominates that market -- and fitness bands from FitBit and Garmin (NASDAQ:GRMN) provide additional competition -- so will the iWatch snatch significant market share?
Smartwatches tend to combine the functionality of a PDA with a fitness tracker. But this emerging market is still finding its footing ... as the mixed reviews of Samsung's Gear devices have shown. And there's an argument for the fact that the PDA aspects are redundant to smartphone users, who would benefit more from buying a simple fitness band such as FitBit or Garmin's Vivofit.
So where could Apple's iWatch fit into the market?
Shaky growth market
The smartwatch market has started to rise, albeit on shaky legs. NPD Group reports that the Samsung Gear accounted for 78% of the $98 million smartwatch market that has amassed since last October. Pebble came in second with an 18% share. Why does Samsung have such a clear lead and what does that mean for Apple?
The same reasons Samsung leads the smartphone market: availability and pricing. Samsung offered the Gear in packaged bundles with two of its popular smartphones over the holidays. And those bundles helped drive the average smartwatch selling point down to $189, according to NPD.
An NPD survey resulted in 20% of respondents expressing an interest in purchasing a smart watch, but price was listed as the top deciding factor. Apple tends not to beat the competition on price, which is a large part of the reason Android has dominated the smartphone market. But Apple could still win with quality.
Problems abound with Samsung's Gear line, which recently launched a revamped version that received mixed reviews due to a lack of apps and problems with the fitness trackers. The iWatch is bound to have better apps available and if Apple can perfect the fitness tracker aspects, the iWatch could leave Samsung in the dust.
But would that combo prove more popular than regular fitness bands?
Rise of the fitness bands
ABI Research notes that activity trackers, or fitness bands, outsold smartwatches four-to-one in 2014's first quarter. And the research firm predicts 10 million trackers to ship this year compared to 7 million smartwatches.
Privately owned Fitbit and GPS-maker Garmin lead the fitness band market. Garmin's first-quarter report showed the fitness segment accounting for 17% of total net sales. And Samsung recently jumped into fitness bands with the release of Gear Fit.
Consumers may continue to prefer fitness bands due to the lower cost, better functionality, and clearer purpose. And the expansion of the fitness band market could compress the growth potential of smartwatches.
But Apple doesn't dabble in low-end devices so the iWatch will serve as the company's strong push into wearable devices ... come what may.
Foolish final thoughts
Tim Cook's still proving his merit as the successor of iconic CEO Steve Jobs. The iWatch will likely top the previously released smartwatches in terms of quality and functionality. But a high price point might send all but the company's most devoted followers to the fitness band rack.
Brandy Betz has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.
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