Dont Listen to Apple Watch Haters, Heres How Fast the Smart Wearable Market is Growing

By Chris

Source: Apple.

Over the past few months there have been plenty of articlesabout Apple Watch owners selling their new, gently used smartwatches on Craigslist and eBay. The reasons vary, but the fact that some Watch owners are already offloading their devices might seem a bit ominous for Apple investors.

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Of course, it's hard to pin down just how many Apple Watch owners no longer want their device, but it's worth mentioning two things here: the smartwatch market is still in the beginning stages, and it is poised to take off over the next few years.

According to data released by IDC last week, shipments of smart wearables (wearable devices that can run non-native apps) are expected to spike by 683% from 2014 to 2015, and climb by a compound annual growth rate of 84.1% from 2014 to 2019.

Last year, companies shipped just 4.2 million smart wearables worldwide, according to IDC, but that number is forecast to hit 89.4 million four years from now.

And the Apple Watch is one of the catalysts for smart wearable growth over the next few years.

"We expect smart wearables, those capable of running third party apps, to take the lead in 2016," IDC analyst Jitesh Ubrani said in a press release. "Smart wearables like the Apple Watch and Microsoft's Hololens are indicative of an upcoming change in computing, and the transition from basic to smart wearables opens up a slew of opportunities for vendors, app developers, and accessory makers."

Apple knows how important this market will be. That's why it has already announced a few major changes to the next version of the Apple Watch's operating system, watchOS 2.

The new email reply feature in watchOS 2. Source: Apple.

You have to start somewhereThe reports of Watch owners hocking the device online should be tempered with the fact that this is Apple's first foray into the smartwatch market. A few people selling the device online doesn't mean the Apple Watch is a bust.

Already this month, Apple showed off the next version of the Apple Watch software, which is scheduled to be available this fall.

In watchOS 2, many apps can run natively on the device, instead of having to rely on an iPhone. Users can also reply to emails directly from the device and control more apps with Siri.

But the biggest leap will come with the next iteration of the Apple Watch (yes, there are already rumors about it). According to Mark Gurman at 9to5Mac, the next Watch will sport a FaceTime camera for video calls, have its own Wi-Fi connection, and be able to perform more functions by itself.

Investors and consumers need to remember that the Apple Watch is the first version of a device in a brand-new market. It's going to take a little time to determine the best ways to use the device. To do so, Apple will have to update watchOS (as it is already doing) and make the smartwatch's hardware more robust (which it is reportedly working on).

What's at stakeThe potential size of the smartwatch market isn't lost on Apple. According to Research and Markets, the global smartwatch market will be worth about $33 billion by 2020, and Apple is trying to make its new device a leader in the space.

The Apple Watch is the company's first new device segment since the iPad, and it's unquestionably a big bet. But let's not forget that Apple is not trying to create a new market on its own here. Microsoft has its own smart band, Samsung has its line of Gear smartwatches, and plenty of other OEMs have launched Android Wear smartwatches.

BI Intelligence expects the Apple Watch to take 40% of all smartwatch shipments this year -- and 47% by 2019-- so it would be a bit premature to assume the Apple Watch is big swing and miss with consumers. Smartwatch growth looks poised to take off very soon, and the Apple Watch's upcoming operating system upgrades, and likely hardware changes next year, should help make that growth possible.

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Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple and eBay. The Motley Fool owns shares of Apple and eBay. 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.

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