Are we seeing the beginning of a permanent downward trend in the once-thriving wearable tech market? If Fitbit’s preliminary information about its fourth-quarter earnings is any indication, competing companies might understandably be nervously wondering if consumers’ fascination with fitness trackers is waning.
Troubling Fourth-Quarter Financial Data
According to a press release, Fitbit expects to confirm that 6.5 million devices were sold in the last quarter of 2016, resulting in total revenue from $572 million to $580 million. Previously, the company announced guidance estimates reflecting an expected $725 million to $750 million. Annual revenue growth was 17 percent for the fourth quarter, although it was forecasted to be 25 to 26 percent.
Fitbit Will Lay Off 6 Percent of Its Workforce
As part of a company restructuring effort designed to slash operating costs, Fitbit has announced it will lay off about 110 employees, or about 6 percent of its global workforce. The company clarified although this move will ultimately result in an improved operating model, it’ll also cost about $4 million, a sum reflected in the first-quarter operating expenses this year.
More Downturn Details
In the United States, Fitbit saw slower-than-expected sales for its products during the Black Friday shopping spike. Company representatives supported that revelation by admitting sales in mature markets have softened. Judging from those facts alone, you might think interest in the wearable tech market has peaked. However, it’s important to look at things from a worldwide perspective.
Desire for Wearable Tech Isn’t Wearing Thin Everywhere
In some European, Middle Eastern and African markets, demand for wearable fitness gadgets, including Fitbits, is still very strong. Specifically, Fitbit saw a 58 percent revenue growth in those geographic areas during the fourth quarter.
Furthermore, Fitbit managed to assert itself as the clear, dominating force in the fitness tracker realm this holiday season, even though overall sales were less than what the company had expected. When shoppers had fitness trackers on their shopping lists, they opted to buy Fitbit devices 75 percent of the time. Garmin, the closest competitor, only snagged 12.5 percent of sales.
Price Is the Biggest Detractor for Most Consumers
When asked about their hesitations associated with buying wearable fitness trackers, most people polled confessed they thought the devices were too expensive. The next most common negative factor was that respondents didn’t think the devices had sufficient functionality. Fitbit hasn’t announced it’s lowering prices, but an upcoming business expansion may help take care of the second issue customers cited.
Fitbit Wants to Launch Its Own App Store
Sometime this year, Fitbit hopes to unveil an app store, leading some analysts to wonder if it might soon offer a smartwatch, especially since the company recently bought Pebble. Pebble was among the first companies to provide the products we now know as smartwatches. Pebble gear failed to achieve mainstream appeal, but it was associated with more than 14,000 third-party apps in a dedicated app store.
Fitbit’s CEO, who was recently asked about his company’s app store aspirations, remarked that Pebble’s experiences “worked out a lot of the kinks” associated with figuring out the logistics of a Fitbit-specific app store.
Fitbit has already unveiled the Blaze activity tracker, which boasts many smartwatch features. It doesn’t support any third-party apps yet, but that could soon change. Otherwise, Fitbit plans to improve the feature sets and functionality of its products this year.
The previously mentioned statistics about holiday shopping sales related to the wearable tech market indicated that Apple was also a strong force to contend with. Although Fitbit probably wouldn’t be able to overtake Apple with its own app store, these new business ideas may enable the company to reverse the 2016 fourth-quarter slump.
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