Fitbit IPO: Fitness Tracker Market Leader Faces Increasingly Crowded Field

By Markets Fool.com

While Apple gets more publicity,Fitbit actually leads the developing wearables market with its line of fitness trackers.

Continue Reading Below

The company began 2015 "as the clear market leader in the worldwide wearable device market," according to June data from IDC. Fitbit, which began trading publicly today, was driven by the release of three new devices (the Charge, Charge HR, and the Surge) along with continued demand for its older Flex wristband, One, and Zip clip-on models, the research firm reported.

Fitbit shipped 3.9 million devices in the first quarter of 2015 giving it a 34.2% market share. That's more than double the 1.7 million it shipped in the same period for the previous year when it held 44.7% of the market. Of course, the biggest challenge for the brand as it becomes a publicly traded company could be the newest competitor to loudly enter the space.

"What remains to be seen is how Apple's arrival will change the landscape," IDC Wearable Manager Ramon Llamas said. "The Apple Watch will likely become the device that other wearables will be measured against, fairly or not. This will force the competition to up their game in order to stay on the leading edge of the market."

The Fitbit family of products includes a variety of wearables. Source: Fitbit

Continue Reading Below

How will Fitbit compete?
Fitbit has been the standard bearer for the developing wearables market, but now the company will need to continue to grow and evolve. Fitbit CFO Bill Zerella told the Fool during a phone interview on the day of the IPO that the company is not worried about competitors.

"When you're looking at a new emerging category frankly the biggest challenge is creating consumer awareness," he said. "When we look at other companies entering the space, whether it's the high end or the low end we see that as an opportunity to raise overall awareness."

It's all about health and fitness
While the company faces intense competition from Apple, Microsoft , and a number of other players, Zarella said that one of the ways Fitbit will grow is by maintaining a laser focus on its core health and fitness market. The CFO called that market "a $200 billion a year opportunity" that will support more than one growing company.

"We are the only company that's entirely focused on this space," he said. "And it's not just wearables. That's a good buzzword, but we're looking for various products and services that can help consumers improve their health and activity levels."

The company plans to use some of its IPO proceeds to triple its research and development spending in the coming year, but Zerella said that spending would stay strictly in the health and fitness space.

Business use will be a path for growth
Another growth path for Fitbit is its corporate wellness program. The company currently derives about 10% of its revenue from those efforts, but Zerella expects that to increase.

"We work directly with enterprises to put our devices into their corporate wellness programs," he said.

Though the percentage varies, companies in the program subsidize part or all of the cost of giving its employees Fitbit devices. The fitness tracker company then provides a turnkey program that does everything from on-board employees to their devices to sharing data on an opt-in basis with the HR department. The company currently has deals with over 50 Fortune 500 companies, according to the CFO.

"We see every major company in some form or another including fitness trackers into their corporate wellness program," he said. "It's a really big opportunity."

Generic is a good thing
Earlier this year, President Barack Obama used "Fitbit" to refer broadly to fitness wearable devices, much like how someone might colloquially use "Kleenex" or "Frisbee."Zerella does not think that his company name being used to describe its whole industry is a bad thing.

"We consider that a compliment," he said. "We are in fact a generic term for a fitness tracker and we're continuing to build that brand around the world, but we think ultimately it helps us."

The article Fitbit IPO: Fitness Tracker Market Leader Faces Increasingly Crowded Field originally appeared on Fool.com.

Daniel Kline owns shares of Apple. He owns a Fitbit but is not yet fit. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.