There's no denying Fitbit's (NYSE:FIT) place in the wearable tech space. Over the holiday season, the company's app topped the free apps chart on Apple's (NASDAQ:AAPL) App Store, and the company currently leads all other wearable tech vendors by unit shipments (yes, even more than Apple).
But Fitbit took a small step outside of its regular fitness tracking world at the Consumer Electronics Show this week when it debuted the Blaze, which Fitbit calls a "smart fitness watch." The device sports the company's first touchscreen, color LCD display, and the option to swap out bands, and it comes with the company's robust FitStar workouts.
Fitbit's investors were unimpressed, however. After the announcement, the company's stock plummeted. But investors can be a fickle bunch, so instead of focusing on why Fitbit's stockholders pushed the price down, let's take a look at how the Blaze stacks up in the smartwatch market -- and if Fitbit can really compete in this space.
Smart, but not smart enough
The Blaze comes with a heart-rate sensor, automatic workout tracking, and the ability to receive phone, text, and calendar alerts (pushed from a smartphone), music controls, and a five-day battery life.
But even with all of those features, there are a couple of major disappointments, the first of which is that Blaze users won't be able to respond to text or call messages from the device itself. This will likely be a huge drawback for consumers, considering that the Apple Watch and Android Wear devices allow users to respond to messages with voice commands or pre-selected messages.
The lack of outward communication from the Blaze is an odd misstep for Fitbit, as the broader wearable tech market is moving to more connectivity. Viewing text and phone alerts without the ability to respond to them doesn't seem fitting for a $200 smartwatch.
But that's not the device's only drawback: the Blaze also doesn't support third-party apps. It's possible the company could add this in the future, but for now, users only have access to the features and services that Fitbit creates, which makes for a far less powerful smartwatch than many others on the market.
Apple's watchOS sports third-party apps, and it already has more than 10,000 apps that can work on the company's smartwatch. Similarly, developers can create apps for Android Wear-powered smartwatches as well. Both Android Wear and watchOS thrive on third-party apps, just as their smartphone predecessors do.
To be fair, the cheapest Apple Watch costs $150 more than the Blaze, and for that price, users demand a lot more functionality. But there are plenty of Android Wear smartwatches on the market starting at $200, and they can run third-party apps and even integrate Google voice search.
One final drawback for the Blaze is its lack of GPS connectivity. The device can pair with a smartphone's GPS tracker, but it doesn't have tracking built in. The company likely left the sensor out to keep the cost lower -- FitBit's $250 Surge device comes with GPS -- but considering the Blaze is a fitness tracking smartwatch, the lack of integrated GPS feels like a major misstep.
Where the market is headed
Worldwide wearable shipments are expected to hit 111 million in 2016, up from 80 million last year, according to IDC. And this year, smartwatch shipments are expected to hit 34 million units, up from about 21 million in 2015.
While I think Fitbit is moving in the right direction with a smartwatch release, I think it's missing the mark because the company -- whether it realizes it or not -- is now competing with the Apple Watch. As IDC noted last month, "Very quickly, watchOS has become the measuring stick against which other smartwatches and platforms are compared." And that's a very bad thing for the Blaze. Sure, Fitbit's smartwatch has some great features and is priced $150 less than the cheapest Apple Watch, but consumers will be giving up a lot of functionality for that price savings, and I doubt they'll find it worth the sacrifice. Additionally, Android Wear smartwatches will offer more smartwatch features for the same price as the Blaze.
Perhaps Fitbit believes it can appeal to users looking for superior fitness tracking, while offering some of the functionality of a smartwatch. That may be, but I think the company is walking down a rough road if that's the case. By 2019, watchOS and Android Wear are expected to take a combined 90% of smartwatch OS market share. That doesn't exactly leave a lot of room for Fitbit to dabble in the smartwatch space.
Now that the wearable fitness company has jumped head-first into smartwatches, it needs to step up its game or risk alienating consumers and investors.
Chris Neiger 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.