ForecastView Webinar Wearables: A New Era Of Mobile Innovation? Susan Wu, Senior Forecast Analyst Anjali Lai, Data Analyst Technographics 360° April 27, 2016. Call in at 12:55 p.m. Eastern time

Forrester’s Technographics® 360 Technographics Survey Data Who are they? What do they say they do? Technographics Behavioral Data What, where, and when are they doing things? Technographics MROC Data Why are they doing it? Why are they saying it? Technographics Social Listening Data What are they talking about? How are they talking about it?

ConsumerVoices

Agenda The past — what happened? The present — what does the landscape look like? The future — what will drive future sales?

Agenda The past — what happened? The present — what does the landscape look like? The future — what will drive future sales?

What is a wearable anyway? Sensor-laden, internet-connected devices Worn on the body, not implanted Dependent on compatibility but independent, can operate as standalone Image sources: Fitbit (https://www.fitbit.com/shop/flex), Ralph Lauren (http://www.ralphlauren.com/product/index.jsp?productId=69917696), Wired (http://www.wired.com/2014/08/ralph-lauren-polo-tech-shirts/), Imore (http://www.imore.com/sites/imore.com/files/styles/large/public/topic_images/2015/topic-apple-watch-all.png?itok=OUtlCphV), Ars Technica (http://cdn.arstechnica.net/wp-content/uploads/2015/03/HTC-Vive_White.jpg), MacRumors.com (http://www.macrumors.com/2015/08/31/samsung-announces-gear-s2-smart-watch/), HiConsumption (http://cdn.hiconsumption.com/wp-content/uploads/2013/07/Reebok-Checklight.jpg)

At first, consumers were skeptical about wearable devices Wearable technology arrives before the social consequences can be discussed. Privacy is a major concern now, and I fear the art of person-to-person communication is being lost, along with awareness of one’s surroundings. If wearable technology catches on, when is there time to listen to the birds singing? -Male, 55- to 59-year-olds “ I think it’s kind of cool hearing about these products, but I wouldn’t personally use them. I love technology, but there is such thing as too much technology. I am curious about it, but I wouldn’t be interested in it. -Female, 18- to 24-year-olds “ Source: Forrester’s ConsumerVoices Market Research Online Community, Q3 2014 (US).

Wearable tech had a rough start Lack of user support from vendor Continued usage and impressions depend on a smooth adoption process with support from vendors. Products not well tested before released for sale Unnatural products worn on the body can spur allergic reactions. High price points for smartwatches Wearables are still complementary devices, not necessary like smartphones. Source: Russell Holly, “Galaxy Gear support coming to Samsung phones amid concern over 30% return rate,” Geek, October 25, 2013 (http://www.geek.com/android/galaxy-gear-support-coming-to-samsung-phones-amid-concern-over-30-return-rate-1575151/) and Fitbit (https://www.fitbit.com/forcesupport/info)

Strong wearables adoption in a short amount of time 50 million 29 million The number of people who own a wearable device today The number of wearable units sold in 2015 Source: Forrester Research Consumer Wearables Forecast, 2016 To 2021 (US)

Consumers began to experience the value of wearables in context If the purpose of wearable technology is to isolate people and entertain them, I’m not in favor of it. If wearable technology improves a person’s quality of life, it’s a good idea. -Female, 60- to 64-year-olds “ Source: Forrester’s ConsumerVoices Market Research Online Community, Q3 2014 (US).

Agenda The past — what happened? The present — what does the landscape look like? The future — what will drive future sales?

Today, US online adults are mostly using wearable devices for fitness tracking and communication 30% currently use or previously used a wearable device 70% have never used a wearable device Top 5 device uses: Fitness activity Communication Biometrics Location Body weight

Current wearables are trendy gift gadgets . . . 29% received as a gift 35% of fitness activity trackers were gifts 6% provided by employer 28% purchased in a physical store 14% purchased online from the manufacturer 22% purchased through an online retailer N = 502, May 2014, US consumers 18+ Source: “New White Paper: Inside Wearables (Part 2),” Endeavour Partners, July 2014 (http://endeavourpartners.net/inside-wearables-pt-2-new-white-paper/).

. . . but lack the stickiness factor for an extension into the future After a year of ownership, about two-thirds of wearable devices are still being used, but abandonment rates are improving When wearable device was acquired Base: 1,700 US consumers 18+, May to June 2014; Source: “New White Paper: Inside Wearables (Part 2),” Endeavour Partners, July 2014 (http://endeavourpartners.net/inside-wearables-pt-2-new-white-paper/).

Phone apps do fine for most runners, who are the target of fitness band makers “41% of people run with their smartphones.” — Esprit (French running club) Image source: Running Club Twitter account (https://twitter.com/running_club/)

Consumers are struggling to manage an increasingly fragmented device ecosystem I currently own a Garmin vivofit for activity tracking. I’m not sure I would want any other devices because I’m distracted from life enough as it is already, thanks to technology. I find that it’s getting easier to lose myself in the technology. -Female, 25- to 34-year-olds “ I like making reservations with my phone. I don’t think I need clothing or glasses to do that, though. It just sounds like too many gadgets. -Female, 55- to 64-year-olds “ For more information, see the "One Task, Many Devices" Forrester report. Source: Forrester’s ConsumerVoices Market Research Online Community, Q4 2015 (US and UK).

Consumers rarely experience an emotional connection with their wearable technology I had a Nike FuelBand, but I lost it a couple of months ago. I’m going to replace it eventually but just haven’t purchased a new one yet. -Male, 35- to 44-year-olds “ Top emotions consumers use to describe wearables: Source: Forrester’s ConsumerVoices Market Research Online Community, Q4 2015 (US and UK) and Forrester’s analysis of NetBase aggregated social listening data, April 2015 to April 2016 (global).

Agenda The past — what happened? The present — what does the landscape look like? The future — what will drive future sales?

Wearables pair well with smartphones 22% Of Smartphone owners own a wearable, and they will drive future adoption Source: Forrester Research Consumer Wearables Forecast, 2016 To 2021 (US)

Smartwatches and fitness trackers will drive future wearables sales, almost doubling in five years $4,815 2016(F) $8,029 2021(F) Source: Forrester Research Consumer Wearables Forecast, 2016 To 2021 (US)

Falling sensor prices drive production Global revenue from motion sensors in wearable and fitness devices (in millions) Image source: Statista (http://www.statista.com/) The average cost of sensors is decreasing over time. Wearable prices are going to be more prevalent and affordable by 2016.

Watch cannibalizing from fitness trackers and affordability will drive future sales Smartwatches offer the same capabilities as fitness activity trackers. Smartwatches and smartphone apps can provide standard metrics with reasonable accuracy. Price points will start to narrow among wearables. Apple, known for holding a brand-premium image, discounted the Apple Watch during the 2015 holiday season, then permanently in March 2016. Image source: Forbes Blog (http://blogs-images.forbes.com/anthonykosner/files/2014/10/apple-watch-selling-points.jpg)

Wearables that displace frustration with convenience will be embraced Primary drivers of wearable device ownership 1 Desire for convenience “ 33% 41%* of US online adults who use wearables do so in order to simplify their lives. of US online adults get tired of pulling their phones out of their pockets. I’m fascinated by this new technology. I like the idea that I can take photos with these devices — it means taking pics could be even faster. -Female, 40- to 44- year-olds Base: 4,617 US online adults and *652 US online adults who use wearables; Source: Forrester’s Consumer Technographics® North American Consumer Technology, Media, And Telecom Survey, Q1 2016 (US) and Forrester’s ConsumerVoices Market Research Online Community, Q4 2014 (US and UK).

Wearables that enrich consumers’ experience with relevant information will be embraced Primary drivers of wearable device ownership 2 Desire for information “ I’m most intrigued by wearable devices that provide immediate internet access to a treasure trove of manuals, data, and records. -Male, Age 65+ 51%* of US online adults who use wearables do so because they like tracking their personal data. 40% of US online adults like that wearable devices can deliver important notifications instantly. Base: 4,617 US online adults and *652 US online adults who use wearables; Source: Forrester’s Consumer Technographics® North American Consumer Technology, Media, And Telecom Survey, Q1 2016 (US) and Forrester’s ConsumerVoices Market Research Online Community, Q4 2014 (US and UK).

Wearables that enable self-improvement and a feeling of being in control will drive device usage . . . 51%* of US online adults who use wearables do so because they are trying to be more active. 40%* of US online adults who use wearables do so because they want to increase their productivity. 44% of US online adults believe that wearable devices help them manage their fitness more effectively. It is pretty cool to see my activity/sleep etc., and it is really helpful to see my current habits so I can mindfully make improvements. I feel like I am getting credit for the hard work I put in when I go running, and I find it satisfying. -Female, 25- to 34-year-olds “ Base: 4,617 US online adults and *652 US online adults who use wearables; Source: Forrester’s Consumer Technographics® North American Consumer Technology, Media, And Telecom Survey, Q1 2016 (US).

Time spent per user per day . . . because this forges an emotional connection, and it is a “sticky” experience For example, US consumers spend more time on their Fitbit app than on other fitness or health/wellness apps in general: Overall mobile app access and time spend: % accessing monthly Time spent per user per day 0% 20% 40% Health/wellness 20% 3:02 Fitness 13% 4:01 Fitbit 6% 4:25 MyFitnessPal 6% 3:43 Weekday average % of mobile app access Fitness app usage Fitbit app usage 20% 10% 0% 12am 12pm 12am 12pm Base: 2,776 US online smartphone owners (18+); Source: Forrester’s Mobile Audience Data, January To June 2015.

Eventually, the network effect will kick in 37%* of US online adults who use wearables do so because the devices keep them connected. 24%* of US online adults who use wearables do so because their friends, family, or coworkers use them. 35% of US online adults say that smartwatches make them more interested in wearable technology. I would love to be able to use my smartwatch to check emails and answer calls. -Female, 45- to 54-year-olds “ Base: 4,617 US online adults and *652 US online adults who use wearables; Source: Forrester’s Consumer Technographics® North American Consumer Technology, Media, And Telecom Survey, Q1 2016 (US).

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Susan Wu swu@forrester.com Anjali Lai alai@forrester.com