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Wearables were thought to be the next big payment innovation, and it’s hard to disagree – what’s more innovative than smart electronics integrated with clothing or accessories? However, wearables are failing to grow at expected rates, with companies such as eMarketer lowering their predications for US adults that will sport a wearable this year from 63.7 million to 39.5 million. And they’re not the only ones lowering expectations.
The wearable hype was short lived because companies lacked the ability to deliver a product that consumers felt they needed or wanted. But all is not lost, for despite the shaky start, wearables may be finally starting to show their true potential.
What’s holding wearables back?
When wearables were introduced, they had all the aesthetics and utilities that one would attribute to a successful product innovation. Take the Apple Watch for example. Despite the clout a brand name of that magnitude holds, they haven’t been able to gain substantial traction with sales declining 71% from Q3 2015 to Q3 2016. Besides famous names and flashy products, there are other reasons holding wearables back from their full potential.
“If I had asked people what they wanted, they would have said ‘faster horses’” – Henry Ford
When companies launch innovative products it’s risky because they don’t know how receptive the market will be. Sometimes the demand is there and people adopt a product quickly while other times it takes longer than expected. There’s no doubt that wearables are innovative products but people find it difficult to see their value and differentiating factors.
The functions that wearables offer are similar to that of smartphones. But while smartphones are often seen as a necessity, wearables are an expensive accessory. If some manage to see the value in wearables, the hefty price tag is often enough to dissuade them from the purchase. The numbers speak for themselves, with smartwatches and fitness bands having abandonment rates of 29% and 30%, and adoption rates of only 10% and 19%, respectively.
One of the most exciting elements of wearables is the ability to pay for products without a wallet. However, the contactless payments infrastructure isn’t developed enough. For instance, to pay with a wearable device, retailers need to accept contactless payments and people need to know how to use them. Although contactless terminals are becoming more common around the world, some areas are taking longer to adapt. In the US, only around 15% of retailers have contactless terminals. As for shoppers, the overall adoption of contactless payments such as Apple Pay, Android Pay, and Samsung Pay, is still low. If a product lacks functionality, it’s hard to make people want it.
The first edition smartwatches and smart glasses weren’t exactly what people expected. The initial products were clunky and unstylish, and when people normally buy accessories it’s not only for practical reasons, but also for appearance. No doubt Apple innovated upon the analog watch, but not everyone wanted a small computer on their wrist. Plus, the price of wearables is hard to swallow for most and the lack of style just makes it worse. However, just because some products had a slow start doesn’t mean all is lost for wearables.
The future looks bright for wearables
It’s not a matter of if wearables will take off, but a matter of when. People constantly look for new products to help them with their everyday lives, and wearables offer a new alternative to smartphones and traditional methods. It’s not going to be an overnight change, but development is already well underway.
Reworked and new wearables
At first glance, smartwatches may have failed to gain consumer adoption after posting -51.6% year-over-year growth for shipments, but that could change in the coming years. At CES 2017, many companies unveiled new wearables to shake up the industry. For smartwatches, the designs moved away from the initial small, unattractive wrist computers to the old analog style with a digital twist. This move may be the tipping point that brings adoption out of the current decline.
Although smartwatches are in a slump, other devices such as smart clothing are on the rise. Instead of integrating with an accessory, smart clothing integrates with things people have and use daily – clothes. People can own a jacket or shirt that not only tracks fitness metrics, but also allows the user to pay for products. By 2020, it is expected that more than 10 million pieces of smart clothing will be shipped yearly – up from 140,000 in 2013.
Contactless payments will stimulate wearable payments
Today, contactless payments aren’t accepted everywhere, but adoption is expected to grow as more retailers make the switch to contactless POS terminals. The US is lagging, but other markets such as Europe are growing tremendously. Over a span of a year, Europeans used contactless payments 3 billion times – nearly triple that of the previous time period.
Everyone is looking for a way to make paying easier and wearables are a step in the right direction for contactless payments and digital wallets. For instance, Lyle & Scott has created a jacket with contactless payment capabilities that lets users pay for products with their sleeve, and at the PGA Tour kickoff event at Arnold Palmer Invitational, MasterCard and Calloway unveiled new wearable golf gear with payment functions. Imagine, going to a restaurant and not needing to worry about bringing cash or credit because you can pay with your jacket. Or instead of bringing your wallet with you to golf, you just bring your favourite golf glove. The integration with smart technology and clothing will make life easier, inevitably fueling adoption.
Personalization and IoT
As the world gets more interconnected people expect more personalized products. It’s hard to imagine something more personalized than a bikini that monitors your temperature and pings you if it’s time to put on more sunscreen. Or a sports bra that can keep track of all your fitness metrics and let you know when you’re rested enough to go back in the gym. Wearables give people the ability to have a personalized experience where ever they go.
Soon, people will be more accustomed to technology in everything – from fridges to cars and even pantries. That is when wearables will be able to provide the ultimate personalized experience by connecting to all devices and being able to alert you when things need attention. Scale back a few years, people were hesitant to connect all their devices because they feared interconnectedness. However, that mentality will shift as more people accept IoT because the convenience outweighs the risks.
The potential is there but will wearables hit critical mass?
Wearables have the potential to reshape the way people pay for products and what devices they use in their everyday life. Yet, there is a lot of work that needs to be done before they reach critical mass. To get there, more retailers need to accept contactless payments and the value of wearables needs to become obvious. The market is still young so prepare for big changes in the years to come.
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