Many consumer wearables market observers are evaluating the industry like it’s the consumer electronics industry, where a relatively small number of companies and brands dominate, but that is a mistake. The wearables industry will evolve to look much more like the apparel industry, where hundreds or thousands of brands will compete for single digit market shares in sub-segments of the wearables market.
This is not to be confused with putting wearable technology in clothing, which is happening and will continue to grow, but this post is about the apparel industry as the best lens to view the development of the wearables market going forward.
This is driven by two fundamental dynamics underpinning wearables:
- Human nature impacts what we choose to put on our body. Going back thousands of years, the things we choose to put on our body, whether a headdress, a tattoo, clothing, a watch or anything else, say something about us as individuals either directly or indirectly. And because they say something about us, they also say something about other people that make those same choices, which puts us into groups and further escalates the tribal and/or social aspects of choosing what we wear.
- There are typically two aspects to consumer buying behavior: functional (can this product do the job?) and emotional (how do I feel about the product and how do I think my use of this product will be perceived by others). Because the sway of human nature mentioned above, the emotional aspects of wearables play a much larger role in determining wearable product choices. In some cases, we care MORE about what the product says about us than the functionality of the product.
The “athleisure” category of apparel is a good example of the emotional dimension. The clothing is designed to look sporty and athletic, but is primarily used in day-to-day, non-athletic activities. People buy this type of clothing to tell the world they live an active lifestyle, whether true or not. The functionality is secondary to the emotional aspects of the buying decision.
These dynamics have lead the apparel industry to be made up of hundreds of market niches across many different market factors. Think about just a few of the functional dimensions that drive important differences in how and why people buy apparel:
- Use case – sports (and sub-niches for different sports), formal, business, business casual, sleeping, etc.
- Age and gender – men’s, women’s, neutral, kids, babies, etc.
- Seasonal – summer, spring, fall, winter clothing
- Regional – clothing and fashion patterns vary by region
- Clothing form factor – shirts, pants, shoes, jackets, accessories, headgear, gloves/mittens, etc.
Here’s a quick look at the breakdown of the apparel market by form factor – it’s highly segmented without taking into consideration all the other factors outlined above.
Source: International Apparel Federation http://iafnet.eu/industry/industry-statistics/
However, the emotional dimensions of the buying decision in apparel can be much more impactful:
- How does the item make me look?
- What message does this item communicate about me?
- How does that message fit with my view of myself?
- What will people say about me when I wear it?
- Which people typically wear items like this?
The result is a massively fragmented industry in which no brand can be considered dominant. Even niches-of-niches-of-niches in apparel are highly competitive.
You are already starting to see this play out in wearables, particularly in the second half of 2017. IDC’s market data is showing the “other” category begin to separate from the pack of individual companies in wearables unit volume sales.
In “long tail” terminology, the long tail chasing the market leaders is getting fatter. IDC’s most recent release of data alluded to “hyper-segmentation” in wearables, although IDC is very likely underestimating the hyper-segmentation across form factors, particularly in hearables.
We expect this trend to accelerate in the next few years, to the point where saying one or a few companies are dominating the wearables industry won’t make any sense. It will be like saying a few companies dominate the “shirt” market.
Here’s something else to think about: everything we’ve covered here is specific to the consumer wearables market. I haven’t even begun to discuss other markets where wearable technology is gaining traction, including healthcare/medical, industrial safety, and gaming. Hyper-segmentation indeed.
Valencell will be following these market developments closely and will update periodically. If you are interested in discussing this further, please reach out to us at firstname.lastname@example.org.