The Apple Watch is a force to be reckoned with, but the best-selling wearable hasn’t lifted the entire smartwatch industry. Just a day after Apple announced that revenue from its wearables division, which includes the watch, spiked 48% in the last quarter, rival smartwatch maker Fitbit saw its stock take a nosedive.
So are people tired of fitness trackers, or are Fitbit’s new products — specifically its newest smartwatch, the $160 Versa Lite — just not a hit with buyers?
The answer appears to be the latter. Fitbit specifically pointed to the Versa Lite’s slower-than-expected sales as the reason for cutting its revenue forecast for the rest of the year. Revenue from the company’s fitness tracker division increased by 51% year-over-year, while smartwatch revenue declined 27%.
“The Versa Lite was aimed at first-time smartwatch owners, but struggled against fitness trackers with smartwatch-like capabilities and with higher-end smartwatches capable of much more, like GPS, NFC and other [features],” said IDC analyst Ramon Llamas.
When Fitbit announced the Versa Lite earlier this year, the company said the device was designed for “people who had been left out of the smartwatch market.” In years past, smartwatches have been pricey and laden with features that some people might not want, such as LTE connectivity or advanced health sensors. But the Versa Lite wasn’t competing with those other, more expensive watches. It was competing with its own predecessor, the Versa.
“The biggest problem with Versa Lite is that it doesn’t need to exist,” said Techsponential analyst Avi Greengart. “The Versa itself, for $20 more when it’s on sale, offers more features for not much more money. If you are trying to save money or you don’t want a full feature set, then the Fitbit fitness bands are more than sufficient, and those have been selling quite well.”
It hasn’t helped Fitbit that the Apple Watch Series 3 remains available to buy, and can often be found for a discount at $199 — the same price as the Versa.
“The Apple Watch absolutely exerts pressure on the entire category because it is so popular,” Greengart said. “But someone who is shopping for a $160 watch is not necessarily shopping an Apple Watch.”
So what does Fitbit do now?
Fitbit CEO James Park pointed to premium services as a focus going forward during the company’s earnings call today (July 31). Fitbit currently offers Fitbit Coach workout video and training program for a $40-per-year.
Park also said that the Versa Lite strategy — a lower price for fewer features — wasn’t the right one. Buyers are willing to either pay a higher price for more features, or wait for discounts down the line.
Whether that means Fitbit’s next smartwatch could be a true Apple Watch competitor with a high price tag to match remains to be seen. But the company needs to shake things up or risk being crowded out by Apple.