Wearables replacing smartphones? Not in the next 5 yrs

BANGALORE, INDIA: Mobile phones are undeniably getting smarter, bigger and faster day by day. Smaller vendors are entering the mobile phone market and doing well. In such a highly mature smartphone market it is increasingly difficult for vendors to compete and differentiate their high-end products.

Another booming device category is the wearables. Gartner forecasts sales of wearables to reach 514 million units in 2020.

Ahead of forthcoming Mobile World Congress 2015, in Barcelona, Annette Zimmermann, research director at Gartner has shared shared her outlook for the mobile phone industry and wearables in 2015 and beyond.

What are the factors that will drive the smartphone market in 2015 and beyond? 

Last year, smartphone vendors focused their efforts on imaging capabilities and larger screens. Both hardware and software enhancements such as an optical image stabilization, sophisticated video editing tools or a higher resolution front camera offered a better user experience. The consumer’s interest in shooting videos or “selfies” will continue in 2015 and beyond, and we expect that vendors will continue to invest in camera and video quality.

While Apple had a very successful 2014 and a record fourth quarter, Apple has to come up with something innovative in 2015 to replicate such record sales.

Price leaders such as Chinese Whitebox vendors, will continue to profit from growing smartphone demand in emerging markets. We estimate the installed base of smartphones was 50 percent in Latin America and 30 percent in Sub-Saharan Africa in 2014, which shows a sizable opportunity for users to upgrade their feature phone to their first smartphone in 2015.

We expect an even more intense competitive mobile phone market in 2015 as vendors deal with the new uncertainty of currency shifts in the Euro-zone that could lead to price increases.

Do you see any new challengers, which are able to disrupt the mobile market in the near future? 

The phenomenon of Wiko is interesting. A completely unknown vendor two years ago has entered the European mobile phone market. It is now among the top five smartphone vendors in France and has recently introduced its products in Germany. The success factors of Wiko are local marketing, good channel management and a product offering at an affordable price range of 100-150 Euros.

Undeniably, competitive features and decent quality attract buyers on a tighter budget, who are not after a global brand. In this scenario, consumers only want an Android device that runs all the apps they want at a cheaper price.

Another interesting debut in the mobile phone market was that of Kodak, which launched in partnership with Bullit Group its first Android smartphone at CES last month. As the name suggests the product is marketed around strong imaging capabilities, easy photo sharing and printing with a custom user interface.

While Kodak is a well-known brand, it is not easy to enter the mid-tier segment of the smartphone market where other strong brand names compete. Microsoft has developed one of the best camera phones in the past three years and continues to put high emphasis on this capability in its high-end and mid-tier product portfolio. It will be interesting to see how Bullit Group/Kodak successfully advertises its new smartphone in Europe.

What is the outlook for wearables in 2015? 

We expect strong growth in wearables in 2015 with smartwatches and fitness bands and other trackers to reach nearly 70 million units, up 38 percent from 2014. However we don’t see these devices replacing the smartphone in the next five years, rather they are a complementary device to the existing portfolio of devices.

This year should be an interesting year for wearables. While the wearables market is currently a relatively low penetrated market, it has the opportunity to grow in double-digits in the long term.

From a vendor’s perspective the Apple Watch is bound to trigger more awareness for wearables, and Samsung, Sony, Lenovo and others will have to come up with more attractive products to compete. Aside from the hardware, vendors will emphasize their ecosystems as well as finding synergies in adjacent markets.

Samsung, Google, Apple and Microsoft are ready to build out entire health platforms that are intended to attract partners in the healthcare and fitness industry. This initiative will trigger new business models, but will also stir up the discussion on how best to protect the sensitive data that is being collected from wearables. In addition, there is still room for improvement for most vendors to create more sophisticated apps and ecosystems around wearables.