Wearables haven’t quite lived up to the expectations of early speculation. The initial success of startup companies Pebble and Fitbit led market forecasters to believe that wearables would grow at a similar rate as smartphones, leaving open the possibility that smartwatches could soon replace smartphones altogether. However, the actual adoption rate of wearables, smartwatches in particular, has been slow among consumers. Reflecting the early optimism for wearables, the market research group eMarketer predicted in 2015 that wearables usage among US adults would grow 60% to over 63 million users. At the close of 2016, the research firm had to drastically cut its forecast to only 24.7% growth and reported there were 39.5 million US wearables users.

One particularly poor quarter in 2016 had many industry commentators reporting that the “wearables fad” had finally worn off. In fact, Q3 2016 smartwatch shipments were so disappointing (declining 51.6% YoY to 2.7 million smartwatch units globally according to IDC) that Motorola announced that it was leaving the market entirely, citing a lack of consumer demand, despite being one of the most prominent vendors involved in the space. But even though adoption has been slow, wearables are here to stay. 

Wearables are the first prominent Internet of Things products to face consumers

Image Credit: forbes.com

More importantly, wearables are currently playing an important role in the consumer electronics world against the backdrop of the Internet of Things. As the first prominent IoT device, wearables are doing the necessary job of training consumers how to interact with the future world of IoT. Most of the value that comes from wearables devices, especially activity trackers, is the software platform accessed through tethered smartphone as opposed to the actual wearable device itself. 

The True Value of Wearables

Without the Fitbit smartphone app, the Fitbit Flex is not much more than a plastic bracelet to most consumers, but with the software platform the Flex is able to become a personal trainer, social media platform, and database for your own fitness statistics. A consumer primarily interacts with their wearable device through a smartphone, and the separation between hardware and software ecosystem will continue to spread as the IoT reaches new products.

Part of the gap analyst job involves going out into retail stores to check products and pricing on a weekly basis. During my weekly time in the wearables sections of Best Buy and Target I hear the same questions from consumers about how fitness trackers and smartwatches work. I frequently hear shoppers ask “does this connect to my phone” and “do I plug the device into my computer” and especially “do I need a separate phone line?” regarding smartwatches. There still seems to be a general confusion among consumers regarding how wearables work as a connected device.

Consumers need to ask these questions now because we are going to see more and more connected products. In order to drive adoption of IoT products, consumers will need to understand how to interact with these products, because more IoT products are coming.

Big Dreams for a Connected World

The biggest buyouts and mergers in the technology and consumer electronics field over the past two years have been related to building a more connected world. Companies, including Apple, Google, Samsung, Intel, Microsoft, and Qualcomm, have all made significant investments in order to emerge as the leader of the connected world; whether through bolstering artificial intelligence technology or developing semiconductors designed for IoT products. 

These companies share a common vision of a world that is digitally interlocked. In a recent press event titled “Huawei Connect 2016,” the Chinese telecom giant Huawei claimed that “in a not-so-distant time, trillions of connections will link everyone, everything, everywhere.” Huawei wants to build that connected infrastructure. Similarly, Intel recently revealed that it anticipates the automated vehicle systems and related data and services market to be worth $70 billion by 2030.

Huawei Connected 2016 event revealed Huawei's vision of a digitally connected world in the near future

Image Credit: carrier.huawei.com

The potential of the Internet of Things presents a grand market opportunity for the technology industry. Not only will the market for connected consumer electronics dramatically increase as more product categories include embedded chips, but the Internet of Things also provides an opportunity for technology and telecommunications giants to revolutionize our world with a new digital interface. Not only will the future connected world require faster and smarter technology, but it will also require new infrastructure and companies such as Huawei and the Telecommunications industry want to build that infrastructure. 

However, the connected world will not rise overnight. The industry giants can develop the perfect technology and construct elaborate new infrastructure, but the adoption and early success of the IoT will be ultimately driven by consumers. Companies can continue to lay out their vision of the world 10 or 20 years down the road, but the connected world revolution still has to begin somewhere.

If the so-far mild success of wearables is any indication, the first wave of IoT products among consumers will also be lackluster. But if the Intels and Huaweis of the world want to dream of the digitally connected future, they need gently lead consumers toward the IoT. And, of course, these companies know this. All of the dominant technology companies, including Apple, Google, Samsung, Intel, Qualcomm, and Huawei are actively involved in the wearables market. So although wearables may not have revolutionized the consumer electronics world as quickly as expected, the products themselves are doing the crucial job of introducing consumers to the idea of the future IoT world.