Fitness-tracking wearables manufacturer Fitbit's recent acquisition of two large smartwatch players gives it the expertise and software to make a play in the premium market, currently dominated by Apple Watch.
The company's existing advantages over the Apple Watch include a lower price tag, the fact that it does not require the user to own an iPhone, and more advanced health tracking capabilities.
Last week, Fitbit acquired luxury smartwatch manufacturer Vector, known for creating stylish timepieces that look like high-end watches but have smart capabilities and a battery life of up to 30 days.
In December, the company bought smartwatch maker Pebble's software and intellectual property.
Pebble, which began as a crowdfunded project in 2012 and raised more than $10 million in a Kickstarter campaign, was one of the first companies to make smartwatches that used electronic ink displays and connected to smartphones.
Fitbit said at the time it would partner with Medtronic to allow patients with type two diabetes to monitor their glucose levels and physical activity data.
World Wide Worx MD Arthur Goldstuck says: "The evidence is mounting that Fitbit is building up a reservoir of patents and design expertise around the smartwatch category. Given the nature of the acquisitions, it appears to be working towards a well-differentiated design that will provide both smartwatch functionality and the simplicity that is the hallmark of Fitbit devices."
He says the company maintains its leadership in fitness trackers due to its clear differentiation. "But the field is becoming increasingly competitive and it needs to pursue a strategy of differentiated breadth rather than its current narrow differentiation."
Goldstuck says Fitbit got to where it is at the moment by giving users what they needed: "A simple, elegant and unobtrusive package that did not try to be a second screen for the smartphone."
He cites trying to be a second screen for the smartphone as the true weakness of most high-end smartwatches.
The time is now
Goldstuck says consolidation is natural in a large, growing and competitive market.
"Many products will always fall by the wayside, and many brands will be absorbed by others. It is the nature of competition. The wearables market is no different; it is just very new and expanding rapidly, so all these developments happen more rapidly and their significance seems magnified."
The overall wearables market grew 3.1% in the third quarter of 2016, with Fitbit's share accounting for 23% of the overall market, according to IDC. The research firm has also predicted the market for wearable devices will experience a compound annual growth rate of 20.3%, culminating in 213.6 million units shipped in 2020.
The IDC expects cellular connectivity and applications to be the two factors driving the wearables market forward.
"Cellular connectivity essentially frees the wearable from being tethered to a smartphone," says Ramon T Llamas, research manager for IDC's wearables programme, who believes the trajectory of the wearables market signals a strong opportunity for developers.
"Applications increase the value and utility of a wearable, and users want to see more than just their health and fitness results. News, weather, sports, social media and Internet of things applications will all have a place on a wearable. And, when combined with cellular connectivity, users will not have to take out their smartphones to get the latest information. All they will need to do is glance at their wearable."
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