Plenty of new products were on display at the Consumer Electronics Show, but one in particular is set to throw a big wrench in Fitbit's (FIT +0.00%) dominance of the wearable fitness market: Under Armour's (UA +4.87%) HealthBox.
In this clip, Dylan Lewis and Sean O'Reilly explain what is going on with fitness trackers, how Under Armour is going to be able to effectively compete in the space, and how this recent development might affect Fitbit.
A full transcript follows the video.
This podcast was recorded on Jan. 8, 2016.
Dylan Lewis: So, you look at Under Armour coming to this market, I think it's troubling for Fitbit for two reasons. First off, I talked a little bit earlier about the class action lawsuit that Fitbit is facing. There aren't a lot of details out on it yet, but it's obviously not good price for a product that is a fitness tracker.
Sean O'Reilly: This is that competition that we all knew was coming.
Lewis: Yeah. It's competition we all knew was coming. Fitbit relies on wrist heart rate monitoring. What Under Armour is doing is having a strap that goes on your chest, closer to your heart. So I don't know which one is more accurate. If I had to take a guess, I'd say probably chest monitoring, because it's closer to your heart. But this is something new that's coming out, and it is directly addressing a problem that is perceived with Fitbit's products. So it's troubling on that front. And then, like you said, it's a huge competitor, just hopping into the space. We saw the market share contraction that Fitbit experienced when Apple jumped in.
O'Reilly: What were you telling me? It went down ...
Lewis: I think Q3 2014, they had something like 32% of the wearable space. Q3 2015, I think it was like 22%.
O'Reilly: This is a one-third drop. This is not fun.
Lewis: So the pie got bigger, and they wound up selling more units, but in their percentage of the overall market, they took a hit. And, something we talked about on that show, I think Vince subbed in when we did that IDC update, because you were out, but we were basically saying that wearables data is so lumpy, because new people keep coming in, so year-over-year comps are kind of weird. But I think you're just going to continue to see Fitbit get slower and slower and slower, and their market share is going to drop. So, it, again, gets into that, OK, are these two distinct categories that can survive? Are they able to be in the same market as these smart watch all-encompassing devices? Or are the fitness bands going to go the way of GPS devices, where the smartphone came in and totally supplanted them?
O'Reilly: Well, and you've got government trying to get in on that now.
Lewis: But I think the difference with Under Armour --
O'Reilly: They're an effective competitor. You said a "new competitor," I was like, "They're an effective competitor."
Lewis: Which is exactly what Apple is, when they came into the market. You look at some of the other fitness band companies out there like Jawbone, or Garmin, something like that. Those are specialty devices. They don't really have the brand name that somebody like Under Armour does when it comes to the fitness space. A lot of people, if they don't already have a fitness tracker, and they're weighing the options out, they're on the market, chances are, they own something that is Under Armour apparel. Their apparel's awesome. I'm an Under Armour shareholder, and I also wear Under Armour.
O'Reilly: I wonder if and when Nike is going to get in on this. Have you heard anything?
Lewis: Yeah, they've been working on it, too. I think all the main athletic apparel retailers are getting in on it. But I think Under Armour has been really pushing the envelope in terms of tech integration with their apparel, and it's something that could pay huge dividends out of.
O'Reilly: Cool.
