Fitbit may have stumbled, but the wearable craze isn’t dead yet

Wearables—smartwatches, fitness trackers, and other portable personal technology—have been declared dead at least a dozen times in their relatively short lives. Adding fuel to that fire is a disappointing earnings report on Monday from Fitbit FIT, -0.83% perhaps the most well-known fitness tracker.

The company announced that revenue in the fourth quarter of 2016 was between $572 million to $580 million, well below the company’s expected range of $725 million to $750 million after a disappointing holiday sales season. The company is expected to lay off 6% of its workforce and restructure the business to reduce costs in the coming weeks. (Fitbit didn’t immediately respond to a request for comment).

But don’t start writing the obituary for the wearable just yet. Despite the bad news for Fitbit, wearable adoption has been steadily rising over the past year, according to numbers from research firm International Data Corporation (IDC). Some 97.4 million wearable devices shipped in 2016, 49.5 million of which were fitness trackers, it found. It expects 124.4 million units will be sold in 2017, 57 million of which will be fitness trackers specifically.

The wearable craze is far from dead, said Ramon Llamas, research manager of wearables and mobile phones at IDC. The market is just slowing down from its initial boom as the most prominent services provided by wearables—basic step-counting and distance tracking—is available on most smartphones, limiting the need for consumers to buy additional devices.

“This is a sign of the market maturing,” he said. “We are still going to have these fitness tracking wrist bands out there, but clearly the market wants to see other devices, whether it’s smartwatches or these hybrid watches. The market wants to see more variety.”

In fact, the majority of Americans now own wearables in some form, market research group Euromonitor found, including fitness trackers and smartwatches: The penetration of these devices increased to 57% in 2017 from 26% of households in 2015. As user interest wanes in the classic fitness tracking band, the new frontier of the wearable market is combining the technology with smartwatches, and Fitbit is already started on that path with four of its models, including the Charge 2 and the Blaze model featuring watch faces now. It also bought software assets last year from Pebble, one of the first smartwatch startups.

The growth in popularity of smartwatches has already had a negative impact on traditional watch sales. Traditional watch sales fell by 4% between 2015 and 2016, Euromonitor found, helped by the popularity of the Apple Watch (AAPL), which was launched in April 2015. “The smartwatch market is about to see a resurgence with a number of new vendors, new platforms, and a lot of development getting into this area,” Llamas said.

In addition to smartwatches, health capabilities are becoming increasingly important with these devices. Soon a doctor could be able to send a wearable home with a patient to track their recovery. Oral Roberts University recently started requiring incoming freshman to purchase Fitbits to track their activity. The medical uses of these devices still have limitations, though, and one study published in medical journal PLOS Medicine found many devices have “no empirical evidence to support the effectiveness of their products” and margins of error up to 25%. Not to mention the privacy concerns of such devices, which create health data users don’t necessarily own.

Privacy and accuracy concerns aside, consumers also see limitations in the usefulness of the fitness tracker—tracking calories, steps, and sleep can be helpful, or it can just be another stressor in our increasingly busy lives.

“The formula hasn’t changed in the last couple of years,” Llamas said. “For the layman, the question is now, ‘I have all this data, what am I going to do with it? How do I make sense of it, and what action can I take from it?’”

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