Fitbit (NYSE:FIT) is by far the leader in the wearable fitness tracker market, with around 70% of the device market share and 85% of the market by dollar value as of Q1 2015. Unfortunately for Fitbit, there is plenty of competition looking to outpace Fitbit with their own products, such as Jawbone, Xiaomi, and even Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG). Can Fitbit stay ahead in this market? Here are the seven strengths Fitbit says it has over other brands that will allow it to maintain and extend its leadership position.
Leading market position and global brand. Fitbit maintains that its main strength is that its name has become synonymous with the connected fitness market. In its IPO prospectus, the company reported that its products were a whopping 85% of the total dollar spend on activity trackers in the first quarter of 2015, up from 70% in 2014 and 59% in 2013. By being the top-of-mind name in this space, Fitbit believes it will remain the sales leader.
Broad range of connected health and fitness devices. The varied types and price ranges of its products is the company's next competitive advantage. While many companies have multiple variations of one basic product, Fitbit has multiple types of products, and variations with in each group, as well as multiple levels of functionality and price, from basic step monitoring to advanced GPS, heart rate, and sleep monitoring.
Advanced, purpose-built hardware and software technologies. Fitbit is not only providing the hardware devices but also the software platform that tracks the data the device gathers and helps consumers to use the information in a meaningful way. Both the hardware and software are focused on one specific health goal, as opposed to something like the Apple Watch that has a health monitoring feature as just one small part of many other features.
Broad mobile compatibility and open API. Because Fitbit is by far the market-leading device maker, its devices work on many platforms, such as Under Armour's Record connected fitness app. In addition, Fitbit's open API makes it easy for other groups to use the platform with their own service for even more connectivity and for future Fitbit sales growth as those software users convert to Fitbit hardware users.
Broad and differentiated go-to-market strategy. Unlike many other competitors, Fitbit is widely available not only in sports apparel and fitness stores but also in many other retail stores. In fact, Fitbit products can be found in over 45,000 retail stores and in more than 50 countries through stores, online sales, and corporate wellness partnerships.
Large and growing community and powerful network effects. The number of Fitbit users has grown from just over a million by the end of 2012 to 19 million by the end of Q1 2015. This momentum not only helps for sales, but it also helps to develop more information for Fitbit to use as it tracks its user base and decides which features make the most sense for future devices through more detailed insights and analysis.
Direct relationship and continuous communication with our users. As I mentioned, Fitbit seeks to use the mass amounts of data it gathers, as well as relationships with Fitbit users, to better understand its users' health and fitness goals, and to then turn those goals into features and content to help users reach their goals. Such a large user base makes this much more effective than other smaller brands.
Is Fitbit stock a buy?
While Fitbit is by and large the market leader, it does face tough competition from others that want to get in on this space, and others that have either more money for R&D (such as Apple), can sell devices much cheaper (Xiaomi), or have much more access to massive data (Google). These companies are likely to each increase sales in their own fitness tracking segments.
However, while there will certainly be competition, the market itself appears to be growing rapidly, as analysts from Juniper Research predict that the fitness tracker market will triple in the next three years. Therefore, even if Fitbit loses some of its market share to these competitors, it still stands to make massive gains over the next few years. From that position, so long as Fitbit can execute on these seven competitive strengths, it will still have plenty of room to run.
Bradley Seth McNew owns shares of Apple and Under Armour. The Motley Fool owns and recommends Apple, Google (A shares), Google (C shares), 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.