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Home / Technology / Here's why Fitbits Smartwatch efforts work – The Motley Fool

Here's why Fitbits Smartwatch efforts work – The Motley Fool



There are still early days for Fitbit (NYSE: FIT) in smartwatches, but it is not denied that the company has drawn the correct strings to give a name for themselves in the room. The wearables specialist has made a solid transition from selling training tracks to smartwatches in a very short time.

The first smartwatch, the ionic, was launched in September in September, and now Fitbit receives 55% of its total revenue from this device category thanks to the addition of a more pocket-friendly Versa smartwatch. In fact, Fitbit claims that Versa's North American sales darkens the combined sale of Samsung Fossil and Garmin smartwatches.

This indicates that Fitbit tries to position itself as a viable Apple Watch option, which in my opinion is a smart thing to do as it can win big from the smartwatch market, even if it end up playing other fiddle to Cupertino

  One Fitbit unit is wearing a football.

Image Source: Fitbit.

Playing to the base

Fitbit has established a massive user base thanks to its first benefits in fitness trackers. The company had more than 50 million registered users by the end of 2016 before reporting this metric. At that time, 23.2 million users, or 46% of Fitbit's registered user base, actively used their devices.

However, active user growth was reduced in 2017 when Fitbits unit sales fell more than 31%. Not surprisingly, the company decided that it would be best to stop reporting the registered user metric, which tracks those users who either have used a Fitbit device or subscribe to one of their services once more. Meanwhile, active users are those who have used a Fitbit device at least once in the last 90 days.

But what we know is that Fitbit has a bank of at least 50 million registered users, and about half of them were & # 39; They do not use their devices as coaches began to get out of fashion. However, the trend changes, thanks to Fitbit's transition to smartwatches. As it turns out, 40% of Fitbit's new device came from activating purchasers during the second quarter, and 51% of these repeat buyers were inactive for more than 90 days.

By comparison, 39% of Fitbits repeat buyers were inactive for more than 90 days in the previous year when there were no smartwatches to offer. So it is clear that the two new smartwatches – the price of different levels to appeal to a wider audience – help the company bring back old customers back in their fold while they also enter the ecosystem.

Fitbit has just started

Fitbit did not spell exactly how many smartwatches it sold last year, but it confirmed that it had just over half of the revenue from this category. This gives Fitbit's smartwatch revenue of $ 165 million for the quarter, which represents an annual income rate of $ 660 million. Fitbit currently has two smartwatches on the market, a price of $ 200 and the other at $ 249.

The cheaper Versa smartwatch is the hot seller of the two. For simplicity, if we assume Fitbit generates $ 200 from all smartwatch sales (which does not reflect the lower price paid by distributors), the company would have sold estimated 825,000 smartwatches last quarter. At this rate, the company may end up selling an estimated 3.3 million smartwatches this year.

Assuming that IDC's smartwatch sales forecast this year also applies, Fitbit will seize around 8% of the smartwatch market in 2018. It's a good start given that 2018 will be its first full year to sell smartwatches . More importantly, Fitbit can continue to cut a larger portion of the cake for itself thanks to its existing user base and the launch of additional services to keep the users hooked.

For example, the company recently launched a dedicated function to track Health to Women, which received a warm response with 2.9 million registrations. Additionally, the Fitbit Coach subscription is affordable, as users can access a variety of body weight training for just $ 40 a year.

A bright future

In all, Fitbit pulls the right strings to make a hole in the smartwatch market. It has reasonable prices and extends its app management system to attract more users. If the company can finally corner up to 15% of the smartwatch market over the next four years, the annual smartwatch sales will shoot well over 13 million based on IDC's 2021 smartwatch sales forecast.

At the average $ 200 smartwatch price, it will easily attract more than $ 2.5 billion a year from smartwatch sales, which will be a big jump over the current annual rally. But keep in mind that these are gross estimates. The most important thing for investors to track is how well Fitbit can win over new and inactive users, just as it has already begun to do.

Harsh Chauhan has no position in any of the above-mentioned shares. Motley Fool owns shares of and recommends Apple and Fitbit. Motley Fool has the following options: long January 2020 $ 150 call on Apple and short January 2020 $ 155 appeals to Apple. Motley Fool has a disclosure policy.


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