Image source: Fitbit

Wearables market hit by cost of living crisis

For the first time in its short history, the wearables market is expected to see a year-on-year decline in shipments.

This is according to market research firm CSS Insight. Their report stats that some 215 million smartwatches and fitness trackers will be shipped in 2022. This represents a 7% decline from last year.

The situation will not improve much in 2023 with sales expected to remain flat. It is only in 2024 when return to growth is expected. From that point on this should accelerate.

By 2026, overall wearables ownership is expected to double from 2021 levels, reaching around 1.2 billion. Of course, these predictions are under the assumption that the global economy will return to growth during this period.

Wearables market
Source: CSS Insight

Last year it was manufacturers that were effected. Chip shortages, the energy crisis in certain Asian countries and other factors made their job difficult.

But in 2022 it is the consumer that is effected. This is due to a combination of factors including high inflation which is causing price rises in smartwatches and fitness trackers, along with a weak global economy. The US dollar is strong but currencies in some countries, such as the UK, have declined. This is adding further pressure on prices.

The situation is not improving as we head into the final quarter of the year. Without fail, this is the most important 3 month period for wearable companies due to the boost from end-year holiday sales.

“The effects of inflation and squeezed budgets have taken a toll on the wearables market throughout 2022 so far”, noted James Manning Smith, Senior Analyst. “With economic difficulties expected to persist in the final quarter of the year, typically the strongest period for wearables sales, even the holiday season is expected to deliver weak demand for wearables”.


People are holding on to their fitness devices for longer

The slowdown is expected to hit both product replacement and new adoption. With more money needed for basic living expenses, people’s ability to buy wearables is being curbed. Having said that, total ownership is continuing to rise – but this is because people are holding on to their existing devices for longer.

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We would add to this the fact that we are not seeing very much innovation on the sensor front. Most people would agree that the last few years have basically seen a rehashing of existing tech. Sensors are being improved and we are seeing some minor innovation such as the inclusion of skin temperature tech in certain devices. But its all evolutionary rather than revolutionary.

CSS Insight expects smartwatch growth to continue to outpace fitness trackers. No surprise there as this is a trend that has been evident for a number of years now. However, strong sales of fitness bands are expected to continue in developing markets which will keep this market category relevant in the coming years.

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