Single-purpose devices develop where there’s a specialized need, one that new technology could fill. It often starts as a niche market, but can rapidly expand into something huge. A classic example of this is the way that Apple (AAPL) moved into the portable music industry with the iPod in 2001.
The danger with a single-purpose device is that if it becomes popular enough, makers of multipurpose devices incorporate the functionality, effectively knocking them back to niche product status.
The Fitbit Flex and other single purpose fitness trackers are facing this prospect as smartphones and smartwatches begin to include health and fitness sensors.
With smartphones gaining their own health tracking capabilities — Apple’s iPhone 5S has an M7 co-processor specifically to track motion while Samsung’s (SSNLF) Galaxy S5 packs a heart rate sensor — and smartwatches packing similar capabilities poised to hit the mainstream, fitness tracker manufacturers are facing a grim reality.
The Lesson of the iPod and the E-Reader
Before the iPod, Sony (SNE) ruled portable music with its Walkman. The iPod not only killed off the Walkman and virtually all competition in music players, it helped digital music services like Apple’s iTunes to decimate physical music sales and spawned a massive industry of iPod ready accessories such as speaker docks.
But with smartphones capable of playing music, why still carry an iPod? Sales of the once-ubiquitous portable music players reached nearly 23 million in Q1 2009, and have declined since, moving just 2.9 million units in Apple’s most recent quarter.
The e-reader was the hardware that launched the e-book, the digital format currently reshaping the book publishing industry.
Sony was the first major manufacturer pushing e-readers, hitting the U.S. market in a big way starting in 2006. Amazon (AMZN) released the game-changing Kindle e-reader a year later. However, when Apple launched the iPad in 2010, the arrival of the consumer tablet marked the point at which the dedicated e-reader’s future was in trouble. Tablets (and later phablets, or large smartphones) could be used to read the same e-books using apps and they could do a heck of a lot more as well.
2012 data from iHS Technology showed sales of e-readers increased tenfold between 2008 and 2010, peaked at 23.2 million units in 2011, then began dropping. They were down by 36% in 2012 and are projected to be around 7 million by 2016.
In 2014, Sony gave up in North America, pulling its e-readers and shuttering its e-book store.
Fitness trackers like the Fitbit Flex are likely at the early stages of a similar contraction in demand for their single-purpose devices. It doesn’t matter how positive Fitbit reviews may be, if it’s one more device to carry, history says many consumers won’t bother — at least not when another multipurpose device in their pocket or on their wrist offers the same functionality.