Why developing markets are ripe for wearable technology
The past 12 months has proved an important period for the wearable tech market. We’ve witnessed an explosion of devices onto the market, and wearables have begun to deliver on the hype surrounding them. From smartwatches to smart wristbands, to fitness-tracking earphones, wearables have evolved quickly, and there are plenty of elegant and niftily-designed devices tempting consumers to invest. Have a quick look at your wrist. It may be hosting a traditional watch now, but Gartner predicts that by 2016, 40% of all western wristwatches will be smartwatches.
Consumer doubt over wearables remains
Despite the explosion of consumer wearable tech onto the western market, there remains an air of dubiousness amongst plenty of consumers, particularly around smartwatches. For many users, the designs of smartwatches haven’t yet developed sufficiently to make them of real value to the wearer, and this has led to poor sales figures. Why fiddle around with a smartwatchwhich has a tiny screen and poor battery life, when it offers less utility than your smartphone? As smartwatches become more efficiently designed and cheaper, however, sales will improve - Gartner predicts 24 million shipments of them in 2016.
Wearables in the growth markets
But what then of the potential growth markets, an area which traditionally has lagged behind the west in technological developments and adoption? Can we expect the wearable tech market to have the same impact?
The landscape certainly looks promising. Growth markets are increasingly investing in infrastructure that supports smartphone devices, with countries like China completing its 4G roll-out. As infrastructure is strengthened, the market becomes more fertile for mass-adoption of smartphones, and this bodes well for the wearable tech market too.
We have already seen the enormous success of the Xiaomi Mi Band in China, a $13 fitness tracking wristband that monitors your activity and tracks your sleep. The wristband has sold more than a million units in China during its first six months on sale, with the low price making it particularly tempting for Xiaomi’s target audience: those at the low-to-middle range of the income pyramid.
Not cut and dried
However, there are a number of factors which need to be born in mind if the wearable revolution is to realise its potential within these new growth markets. There are fundamental differences between western and growth market consumers in terms of accessing and utilising digital content, and this is particularly poignant for the smartwatch market, where apps are involved.
If consumers do invest in a smartwatch, then they will need to be able to pay for the apps from the likes of Apple’s AppStore or Google’s PlayStore. However this could be a stumbling block given the low penetration of debit and credit cards amongst many growth-market consumers. Data from the Worldbank shows that the US has a penetration of 72% whereas Nigeria has 19% and Ghana only 11%. If consumers can’t pay for the content, they can’t access it, and if they can’t access it, the wearable device’s utility is severely hampered.
It’s clear then that banking and payments infrastructure either needs to develop to meet western models, or the wearable tech market needs to bear in mind the limitations of its audience, and work innovatively around them. The Xiaomi Mi band was successful partly because as a device it is very simple, and doesn’t require the user to pay for content or services via an app store. Simple and affordable wearable devices therefore have an increasingly ripe audience waiting for them within growth areas.
One thing to bear in mind is the fact that Xiaomi is a local brand within the Chinese marketplaces, which gives it a significant advantage. Partnering with local network operators is a prudent approach for western wearable device manufactures, as it is via these network operators that consumers typically make payments and transfer money. Our research shows that in developing regions, consumers trust mobile networks operators far more than third parties, particularly where payment agreements are already in place. The network operators therefore act as gatekeepers when it comes to offering content and services to consumers who don’t have a credit or debit card.
Wearable technology is developing swiftly in the west, and the excitement has been replicated within the growth markets too. Telecoms and financial services infrastructure changes will help to pave the way for a more broad array of wearables in the growth potential markets, and it will be interesting to see how the more popular western tech brands fare when it comes to snaring that ‘next billion’.
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