Fitbit Flex: Will Fitness Trackers Disappear in a World of Smartphones and Smartwatches?

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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.

20140808 (B. Moon) Will Fitness Trackers Disappear in a World of Sensor-packed Smartphones and Smartwatches

Source: Fitbit

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.

Adapt and Expand Capability

When multipurpose devices begin to eat your market, you can fight back and at least delay the inevitable by including some of their functionality — in effect transforming the single purpose device into a “light” multipurpose one.

For example, iPods gained the ability to play video and games. E-readers gained Internet access to browse and buy from online bookstores as well as tie-ins to social media sites like Facebook (FB). Digital cameras — another endangered single-purpose device — began offering some of the features of smartphones such as wireless connectivity, on-screen photo editing and software filters.

In the case of Fitbit, the Fitbit Force was its attempt to expand its capabilities beyond being solely a fitness tracker, attacking the smartwatch by incorporating some of its features. An enhanced display was capable of showing more fitness data at a glance, as well as caller ID notifications from iPhones. Unfortunately for Fitbit, the Force became embroiled in a recall issue and was forced off the market.

Embrace the Niche

The best way to survive long-term as a single-purpose device is to embrace the niche market.

Amazon has done that with its Kindle. Ignoring dropping demand for e-readers, Amazon continued to refine its product while slashing prices. When you can buy a Kindle for $69, the e-reader is almost an impulse purchase. The days of selling 20 million e-readers a year might be gone, but there are also fewer competitors — Barnes & Noble’s (BKS) Nook e-reader is on shaky ground and may be the next to go.

Amazon and Rukuten’s (RKUNF) Kobo (maker of my favorite e-reader of all time) may find themselves as the primary players in a niche market, but one where they can still make money selling a single purpose e-reader.

Fitbit is the market leader when it comes to fitness tracker manufacturers. CNET’s Nick Statt reports the company accounted for 67% of fitness tracker sales in 2013, and its share continues to grow, despite the Force recall that leaves the year-old Fitbit Flex is the most advanced model it currently sells. Fitbit reviews remain positive and even as competitors like Nike (NKE) are souring on the fitness tracker market, Fitbit is the best bet to survive the eventual slump in demand for single purpose fitness trackers.

By continuing to improve its product (including adopting features like notifications) while bringing prices down, Fitbit could carve out a comfortable niche market for itself as the producer of the best standalone fitness trackers — even in a world where everyone already has the ability to track health and fitness data using their smartphone or smartwatch.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2014/08/fitbit-flex-fitness-tracker-aapl/.

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