The fashion designer and manufacturer Fossil Group recently made a name for itself in the technology world. The designer group famous for its watches, wallets, and belts sold across an expansive licensed brand portfolio that includes Michael Kors, Marc Jacobs, Emporio Armani, in addition to Fossil and many others, emerged as one of the top 5 leaders of the connected wearables market. According to a recent report from the global shipment tracking firm IDC, Fossil shipped roughly 1 million wearables products in the second quarter of 2017, claiming its position as the fifth leading wearables company. This notable achievement is especially impressive considering that Fossil beat out some of the technology titans LG, Huawei, and Samsung. How was a fashion designer able to emerge as a top contender in a consumer electronics industry?
Fossil’s Path to a Leading Brand
Two years earlier, Fossil made its first move into the connected wearables market with the $260 million acquisition of activity tracker manufacturer Misfit. Immediately following the merger, Fossil set the ambitious goal to release 100 connected wearable SKUs in 2016 across several brands. But purchasing the technology and developing a robust product portfolio does not necessarily translate into consumer demand. The most successful aspect of Fossil’s wearables campaign was the fashion conglomerate’s push into the traditional consumer electronics channel. Previous gap intelligence reporting has followed Fossil’s growing presence at the number one consumer electronics chain: Best Buy.
In terms of the number of products available at Best Buy, Fossil’s growth at the retail chain has outpaced all other wearables companies. According to gap intelligence data, wearables placements from brands under the Fossil Group umbrella at Best Buy grew 700% from the two Misfit placements at the CE retailer to 16 different models from the brands Fossil, Michael Kors, Kate Spade, and Skagen with net prices ranging from $49 for the Kate Spade Activity Tracker to the $395 for the Michael Kors Actress Bradshaw Android Wear smartwatch. In the second quarter of 2017, which is the same quarter that Fossil reached the top 5 wearables shipments, Fossil brands held a leading combined 16% share of Best Buy’s wearables shelf.
Can Fossil Sustain Wearables Growth In Evolving Market?
Fossil continues to grow its wearables portfolio, notably with new smartwatch models from a growing number of brands. Fossil brands that now feature an Android Wear-powered smartwatch include Diesel, Emporio Armani, Fossil, Michael Kors, and soon Misfit as well. Despite Fossil’s current wearables success, early smartwatches proved that the market is defined by use-case; the “smartphone on your wrist” positioning proved to not be a compelling enough argument to mainstream consumers. Several early entrants in the smartwatch space, including major technology companies such as Motorola and Asus, have either scaled back smartwatch production or abandoned the market entirely due to poor performance. The Apple Watch was able to gain traction not only due to the success of the Apple brand, but also because the Cupertino-company focused on health and fitness applications for its smartwatch. Similarly, Garmin found notable success with its premium multisport GPS watches such as the fenix series and high-end Forerunner watches, which targeted serious athletes.
And the recent smartwatch announcements, including the Fitbit Ionic, Apple Watch Series 3, and Garmin vivoactive 3, show that the market is becoming even more specialized. Each of these new devices run on proprietary software and carry many of the same suite of features and hardware, including on-board heart rate-monitor, GPS, mobile payment solution, and app store. Each device also strives to support its own niche capability in the growing and competitive smartwatch market. For example, the Fitbit Ionic not only strives to be the complete health and fitness coach but also carries the capacity for specific biometric tracking such as sleep apnea and glucose levels. As Fossil’s competitors continue to build a robust set of feature that increasingly become more targeted to specific consumer groups, Fossil’s “generic smartwatch” approach may lose consumer appeal, especially as its rivals continue to build partnerships with other designer brands.
Fossil Solution to Growth is its Brand Diversity
Fossil is already in a unique position market position compared to its wearables rivals that will allow the fashion company to continue its growth in the technology world. Fossil Group already carries a diverse portfolio due to its brand licensing agreements. Instead of releasing similar smartwatch products across its brand portfolio, the fashion company should target specific consumer groups within each brand in its repertoire.
We have already seen this strategy implemented from another fashion group. The Louis Vuitton Tambour Horizon is a ridiculously priced Android Wear smartwatch that will never reach mainstream appeal due to its $2,450 starting price. The watch comes with two pre-installed travel apps that position the device as an ideal device for the “contemporary traveler.” Fossil already implements what it refers to as “micro-apps” into its smartwatches, which are designed to support brand identity of the watch. But the company needs to emphasize this “brand identity” in order to maintain its relevance in the smartwatch world. The Android Wear platform will cover the general smartwatch features, including mobile payment system, optional cellular capabilities, and app store, leaving the task of targeting specific niches to Fossil.