The market for wearable devices, like activity trackers, notifier bands, smart watches and head-mounted displays could reach 48 million units this year and 91 million in 2015. However, according to NPD DisplaySearch Wearable Device Market and Forecast Report, the market is expected to experience a slow down after 2015, as consumers rebound from the initial hype.
Given the significant uncertainties in consumer adoption, retention, and product development, the research firm developed three scenarios for the market forecast: Forward into the Past, Incidental to Essential, and Persuasive and Pervasive. The expected slowdown, and subsequent return to stronger growth, is evident in all three scenarios.
Scenario 1: Forward into the Past
1. Forward into the Past: Wealthy early adopters are the first owners, and they reinforce the desirability of wearable devices.In the first forecast scenario, “Forward into the Past,” wealthy early adopters are the first owners, and they reinforce the desirability of wearable devices. Market adoption eventually trickles down to less tech-enabled consumers as prices drop, but as fashion fades, the market shrinks dramatically before becoming established. Over time, continued price erosion leads to market expansion.
In this scenario, China is expected to dominate demand due to its huge market and strong smartphone uptake; however, a strong fashion effect would cause a surge and then backlash in China in 2017. North America and Europe would experience a slower decline than China in 2017. “Chinese shipments would then accelerate later in 2017, as unbranded and local suppliers gain share by selling wearable devices at low prices,” Gray said.
Scenario 2: Incidental to Essential
2. Incidental to Essential: What starts out as a casual purchase becomes essential, due to the intrinsic usefulness of wearable devices.In the second forecast scenario, what starts out as a casual purchase becomes essential, due to the intrinsic usefulness of wearable devices. Consumers become locked-in, and loyal to, combinations of devices and services.
In this scenario, China again dominates demand, for the same reasons; however, a more limited fashion effect causes a surge and then decline in China in 2016. The decline is limited in North America and Europe by the dominance of a few brands that can maintain sales by bundling strategies. China accelerates in the later part of the forecast, as unbranded and local suppliers gain share. Strong branded offerings cause a market surge in all regions, especially North America, where adoption is locked in.
Scenario 3: Persuasive and Pervasive
3. Persuasive and Pervasive: The health benefits of wearable devices become significant, while body sensing becomes a critical part of everyday life.In the final forecast scenario the health benefits of wearable devices become significant, while body sensing becomes a critical part of everyday life. While China again dominates demand in the longer term, it would be relatively slow to grow.
Here, the fashion effect would be minimal, as the primary driver in the market is healthcare applications; the market is forecast to plateau in 2016, but does not decline overall. North America is the earliest adopter of wearables, reinforced by social networking. Chinese market growth would accelerate again in 2017, as local suppliers gain share at lower prices.