Some wearable devices are specifically designed as fitness trackers with varying features, while others almost incorporate the complexity of a computer.

Top manufacturers including Fitbit (NYSE:FIT) and Apple (NASDAQ:AAPL) are holding their own in the market, but what if someone came along with the best of both worlds -- fitness tracker and smartwatch? Market trends point to the fact that the device with the most functionality wins market share.

How will that trend change the face of the current market and how will market leaders need to change their approach to their products?

Listen to the full podcast by clicking here. A transcript follows the video.

 

This podcast was recorded on Dec. 4, 2015.

Vincent Shen: Are there any other trends in the data that you wanted to mention?

Dylan Lewis: Yeah I think something that's worth noting is it seems like there are kind of two distinct product categories here. Something that I've always been really interested with as far back as the Fitbit IPO and once we started getting rumors about the Apple Watch is, are these two different segments going to merge into one? And is there going to be one winner? Right?

And so again from their release, "Smartwatches have drawn increased attention to the market from likes of Apple, Motorola, Pebble, and Samsung. But this has not dampened interest in fitness trackers. By the end of Q3 2015 shipment volumes for both product categories increased sequentially and year-over-year, showing that for now, the categories can coexist and grow. This also provides end-users with a choice in terms of feature sets and functionalities ranging from simple fitness tracking to smartphone-like experiences."

So it seems like IDC at least for the time being, is saying there's stability in both of these markets and there are consumers that are interested in both ranges of product offering. And I think that's a little bit to the point of what we were talking about earlier where maybe someone wants to try out a fitness tracker. They aren't sure they really want to commit to something that's as expensive as an Apple Watch or something like that. And they try something from Xiaomi or maybe one of the lower level offerings from Fitbit. And kind of just whet their appetite a little bit and see if it's something they're interested in.

I don't know how long this is going to hold. I've always been kind of skeptical of this, but it's definitely something to continue watching.

Shen: I think the concern is that right now I think you either have your more higher end smartwatch, right? And the functionality there is simply wider than like a fitness tracker that you might get from Fitbit. And while those feature sets remain separate, the price points also remain separate where you can get a Fitbit for like $50-60 bucks I think for their introductory models.

Whereas some of the nicer smartwatches will cost you several hundred dollars. But I do think there's going to be a point at least technologically where they're going to be able to merge all of those things into one and it will be at a very competitive price point where people will think, I'll just get the smartwatch that also happens to have some of those health tracking features for example. And you might start to see more consolidation.

Lewis: Yeah you look at the history of tech gadgets and generally the all-encompassing device wins out, right? People very rarely want a dedicated device that is capable of doing one thing very well. They're OK with having -- unless you're using it for like nautical GPS or something that is a very focused use -- most people are OK with a good enough product that has more range in functionality.

Shen: Maybe it's just kind of like the more basic digital cameras too and how they've kind of been like wiped out essentially by really nice cameras on smartphones. So now that for at least for dedicated cameras, you really are in the market of like DSLRs and higher-end equipment where of course that's going to produce a better quality image. But otherwise all the other point-and-shoots are pretty much not that popular anymore.

Dylan Lewis has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.