Apple Makes a Splash in the Wearables Market

Over the last few years, the "next big thing" in technology has been wearables. And, for the most part the key word in that term has been next, as wearables have failed to catch on in a meaningful way. According to research firm IDC, however, it seems as if the product line is now ready to shed the next label and form a legitimate market.

The wearables market grew 223% on a year-over-year basis last quarter, going from 5.6 million units shipped in Q2 2014 to 18.1 million this year's recently reported second quarter. In addition to strong growth among most existing participants, IDC's data found new entrants such as Apple and Xiaomi added to the year-over-over growth figures. Here's how it breaks down:

Source: IDC. Units shipped figures in millions.

Obviously, this is in a market in the early growth phase, marked by increased sales and shipments that outpace worldwide GDP growth and multiple new entrants. So conditions on the ground could quickly change, and look for Apple to continue to execute in the wearables market.

The Apple effect cannot be understatedFor all participants, Apple's entrance into the market should be considered a double-edged sword. On one hand, the presence of a deep-pocketed, able competitor that Forbes ranks as the No. 1 brand could potentially steal market share from existing participants. However, according to IDC research manager Ramon Llamas, "[A]ny time Apple enters a new market, not only does it draw attention to itself, but to the market as a whole." Essentially, Apple's blessing a new product is akin to free marketing and product promotion.

And it appears Apple really dominated the wearables category where it counts. Although the preceding table uses a consolidated total, the wearables market is actually two distinct markets -- on one hand you have the basic wearables category that primarily includes fitness trackers and that can't run third-party apps. The leader in that category, and overall, continues to be Fitbit with its lower-cost offerings.

However, IDC thinks the basic wearables category will continue to lose market share to smart wearables. And Apple is clearly the leader there: As senior research analyst Jitesh Ubrani remarked in the press release, "[A]bout two of every three smart wearables shipped this quarter was an Apple Watch."

Fitbit's conundrumFor Fitbit, this potentially presents a problem that's currently playing out in the smartphone markets. On one hand, the basic-wearables market should become a price-dependent one as the product faces substitutes from smart wearables and technology erodes first-mover advantages among basic wearables competitors.

And while it should be noted that Fitbit is in a better position than most low-end phone manufacturers, as it owns its "ecosystem" whereas most low-end phone vendors use Android's plug-in OS, singular-focused products are less ecosystem dependent -- so it's less of a differentiator.

To be fair to Fitbit, its recently released its second-quarter results displayed the opposite. The average-selling price per device increased from $63 in last year's corresponding quarter to $88 this quarter, as the company credited "new products" for the increase.

The company added new models during that timeframe -- a $150 MSRP Charge HR band and a $250 Surge GPS watch -- apparently betting consumers will continue to pay more for singular-focused devices. That's perhaps true if the market continues to expand, but IDC thinks a shift toward smart devices will happen.

The article Apple Makes a Splash in the Wearables Market originally appeared on

Jamal Carnette owns shares of Apple. The Motley Fool owns and recommends 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.

Copyright 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.