Authored by Ganesh Shewatkar, Senior Consultant, Avalon Consulting and Shubham, Management Consultant, Avalon Consulting
The clock is running out for mid-range smartwatch players as they face an unprecedented market squeeze. The smartwatch industry in India is witnessing a significant paradigm shift, particularly in the mid-range segment (INR 2,000-10,000). The once-thriving mid-range category now faces unprecedented challenges, evidenced by a 34.4% year-over-year decline in unit sales from CY23 to CY24, reducing total unit sales from 53.3 million to 35 million. The market has been shrinking since the start of the year, marking the third consecutive quarter of decline, with a drop of 8.7% to 25.9 million units in 4Q24.
Market Dynamics and Segmentation
Potential reasons for decline
The mid-range segment finds itself in a precarious position. While premium brands like Apple, Samsung, and Garmin continue to show steady growth, with a 2.1% to 2.8% increase in market share by units from CY23 to CY24, mid-range manufacturers are struggling to articulate their value proposition to increasingly discerning consumers.
The decline can be attributed to three key factors:
1. The initial novelty of smartwatches has worn off, particularly among casual users who haven't found sustained utility in these devices.
2. Health-conscious consumers and athletes, who once comprised a key customer segment, are gravitating towards high-precision premium smartwatches and wearables like smart rings, (shipment growth from 112k to 323k, 186%, in CY24), smart bands offer superior tracking capabilities and ecosystem integration.
3. The segment has suffered from low repeat purchases. Many early adopters who experimented with smartwatches have not returned for a second purchase due to the perceived lack of differentiation and changing expectations.
A closer examination reveals a troubling pattern of commoditization. Most mid-range offerings rely on generic LED screens and basic fitness tracking, with little evolution in product design or function. These devices, often assembled using off-the-shelf Chinese components with minimal innovation, struggle to differentiate themselves beyond cosmetic changes such as strap colors and display sizes.
Changing consumer expectations have also played a pivotal role in shaping this downturn. Today's users demand accuracy in health-tracking features such as ECG, SpO2 monitoring, and sleep analysis. Unfortunately, mid-range smartwatches frequently fall short of these expectations, leading to dissatisfaction and a shift towards premium alternatives. Additionally, the aesthetic appeal of watches remains an important purchase criterion, yet most mid-range smartwatches look strikingly similar, offering little variation or personalization.
How can Mid-range players rethink their strategy?
For mid-range manufacturers, the path forward requires a fundamental reimagining of their approach. Rather than attempting to replicate smartphone functionality on a wrist-sized display, brands must focus on creating distinct value propositions that justify their price point above economy models while offering a compelling alternative to premium devices. Here are some suggestions for mid-range players to consider:
1. Rather than attempting to develop proprietary technology, mid-range players should forge strategic partnerships with established technology providers. For instance:
Fossil's collaboration with Google for Wear OS
Noise's partnership with Bose for audio capabilities
c. Potential collaborations with semiconductor manufacturers for custom chipsets
2. Instead of competing across all features, players should focus on excelling in specific verticals:
Sports-specific devices (e.g., swimming, golf, running)
Fashion-forward designs for style-conscious consumers
Specialized health monitoring for specific conditions
d. Industry-specific solutions (healthcare, industrial safety)
3. Developing highly optimized companion apps with seamless integration into iOS and Android ecosystems or other app ecosystems could help create sticky user experiences that drive long-term engagement.
a. Native compatibility with popular health apps
b. Cross-device functionality
c. Development of companion apps with unique features for android and iOS
4. Partner with fashion houses and industrial designers to create distinctive products that stand out in the crowded market
a. Collaborations with fashion brands for limited editions
b. Focus on premium materials within cost constraints
c. Customizable elements for personalization
d. Innovative form factors beyond traditional watch designs
Success in this market will require brands to make bold choices: either move upmarket with precision-focused health devices or embrace hybrid designs that prioritize style and selective smart features. Companies that continue with incremental updates and minimal differentiation risk further market share erosion.
As the wearables market continues to evolve, the winners in the mid-range segment will be those who can clearly answer the question: Why should consumers choose their devices over both budget alternatives and premium offerings? The answer lies not in trying to be all things to all people, but in creating focused, differentiated products that deliver clear value to consumer segments.
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