Smartwatch shipments fall for the first time; Apple is the only brand to decline in top 5

It hasn’t been long since smartwatch as a category entered the technology world. But in under 5 years, the category has already started showing signs of decline. According to IDC, smartwatch shipments have fallen from 5.1 million units shipped in Q2 2015 to 3.5 million units shipped in Q2 2016. This equates to a 32 percent drop in shipments.  As seen from the chart above, Apple has seen the largest decline as compared to its competition. Falling almost 25 percent in terms of units shipped year on year. However, Apple still leads the category, even with shipments being halved to 1.6 million. One of the reasons for the drop could be the fact that Apple Watch is almost a year old now. It is also the most expensive watches in the list depending on the category you select. Another reason is that watchOS 3.0 is expected to start rolling out later this year, and it is a major upgrade in terms of user experience and features added. Samsung has entered in the double digits with a 16 percent market share and a 9 percent jump in year on year shipments. With a 200,000 unit jump in its shipments, Samsung has seen the highest growth in this quarter. A lot of credit for which has to go to the Gear S2, which is easily Samsung’s best smartwatch to date. According to IDC, a large credit also goes to American telecom companies which have been pushing Samsung’s smartwatches as an alternative to the Apple Watch. Also the fact that Samsung Gear S2 can work independent of the smartphone, has attracted a lot of potential buyers to it. Lenovo has seen a minor bump in its shipment numbers, thanks to Motorola’s refresh of the Moto 360. Motorola also introduced the Moto 360 Sport, which is targetted at fitness enthusiasts. According to IDC, Moto 360 Sport has been met with mixed results as the device still lacks some of benefits that can be had with fitness-first smartwatches from the likes of Fitbit, Garmin, TomTom and so on. LG Electronics and Garmin have almost doubled their market share in the last one year, but in terms of numbers they are still 300,00 and 100,000 odd units.

For a category as young as the smartwatches, a decline so early on is not really a good sign. One message it sends across clearly is that people are not as kicked about the smartwatch segment as they were of say mobile phones. A lot of smartwatches need to be tethered to some smartphone or the other, which really does put a question mark on a compelling use case for smartwatches. Sure, we know that a smartwatch is supposed to be a companion to your smartphone and bypass the need to use the smartphone as often. Clearly seems like people are on the fence about taking the plunge with just this incentive on offer.

According to Jitesh Ubrani, senior researcher analyst for IDC Mobile Device Trackers, “Apple still maintains a significant lead in the market and unfortunately a decline for Apple leads to a decline in the entire market. Every vendor faces similar challenges related to fashion and functionality, and though we expect improvements next year, growth in the remainder of 2016 will likely be muted.” Absence of traditional watch makers is also being quoted as one of the major reasons why smartwatch sales have seen a decline. Watch makers such as Casio, Fossil and Tag Heuer have been releasing smartwatches but their sales haven’t been enough to ensure that any of them featured in the top 5. According to IDC, one of the main criteria that the traditional watch makers bring to the table, which is still a matter of debate when it comes to smartphone players, is design, fit and functionality. “Combine these with the brand recognition and distribution these brands already have, and it’s reasonable to expect the smartwatch market to grow from here,” said Ramon T Llamas, research manager for IDC’s Wearables team. Irrespective of the decline in smartwatch sales, it is too early to write off the segment. With product refreshes, the category should ideally see a jump again, but according to IDC that jump shouldn’t be expected anytime this year. Vendors need to be able to find a compelling use case for smartwatches, and of course better designs, hints the IDC report.