The smartwatch segment is being treated as part of the fast-moving fashion and lifestyle industry, though it is a technology segment, and brands are caught in a vicious cycle of high-speed launches at low prices with minimal changes, while spending more on marketing, to stay abreast, industry executives said.
“Fashion brands keep a high margin of 60-65% to accommodate for the variations they need to make in their products, all of which might not sell. But to do that for smartwatches, where margins are at best 20-25%, it starts eating into your unit economics,” said Sameer Mehta, chief executive at Imagine Marketing that owns the Boat electronics brand.
This cycle will hurt brands that are in the business of trading, where they place big orders to original device makers in China which keep coming up with new products, and sell them in India at a slight markup, making some to exit or pivot to other segments this year as profits start to dry up, he said.
“Some of the wearable brands have ten different apps on the app store, because they buy from ten different suppliers. There are instances where the exact product can be seen being sold by another brand in China,” said another top executive from a wearable brand.
“Without R&D, without manufacturing, wearable brands will not be able to survive in the coming years. Time is running out for them,” this executive added.Smartwatch shipments, although the fastest growing in the wearables category, have seen a sharp decline in the pace of growth. The segment grew 41% on-year in the July-September quarter of 2023 to 16.9 million units, after charting 179% growth in the same period of 2022 to 12 million unis, as per IDC India.At the same time, the average selling price of smartwatches dropped 35.3% on-year in the third quarter to $26.70 (around Rs 2,200) from $41.90 (around Rs 3,400), according to the research firm.
Mehta said there are now signs of the segment starting to slow down, as consumers start demanding better experiences once the initial hype dies down. “Customers now want products that have the metrics they want to track, the watch faces they design as a community, and overall a well-integrated product that serves their needs,” Mehta said.
It will soon be no longer about the sizes and colours, he said, comparing it to the smartphone industry where hardware specifications are now slowly giving way to software experiences.
