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.
“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.
