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Fitbit Versa tries to offset wearables decline with $200 model

The wearables market might be one of the best examples of the race to the bottom in recent years. Fitbit, once a golden child, has been forced to claw itself up the price lists, away from the cheaper fitness tracker segment that has now been completely commoditized by cheaper Chinese options. With the bottom end off limits, Fitbit has been trying to scratch out some space at the premium tier, but that is a niche that has been dominated by Apple from the off.

But the new $200 Fitbit Versa sits just under the $250 line that marks the cheapest Apple Watch offering. Gone are the days of the $17,000 model, as Apple wisely backed away from that approach quietly. The Versa is Fitbit’s third smartwatch design, and is more of an attempt to offer feature parity with the Apple Watch than it is an attempt to carve out a niche – like rival Garmin has done, cornering a big chunk of the fitness enthusiast market.

Unveiled just five months after the launch of the $300 Ionic watch, the Versa is noticeably slimmed down – and cheaper because it does not have GPS. It still supports the same application platform as the Ionic, which is being run on Fitbit OS (not Android Wear), and both the Ionic and the Versa will get significant software updates in the near future. Fitbit bought smartwatch sweetheart Pebble, securing an experienced software team – but canning the much-loved devices in the process. Also dead is the Blaze, Fitbit’s first smartwatch, which will be shortly discontinued.

The Versa’s screen is pretty bright, and the lack of a GPS means that it can claim a four-day battery life. There is an option to add Fitbit Pay, the NFC-based contactless payment system supported by around 40 banks, for $30 in the US – although that feature is enabled by default in the other markets. Fitbit is not talking about the processor powering the Versa. Notifications can be interacted with if the use has an Android phone, but Apple’s closed-down platform means that this isn’t possible for iOS users.

One of the key focuses of the new Versa is to reach out to a wider audience, with female buyers apparently a key target. The slimmer design has apparently been crafted to better appeal to more purchasers’ preferences, and a few of the applications have been tweaked to offer functions like menstrual cycle tracking – something that Apple has had since 2015.

The health and fitness data is valuable to many consumers, as part of the trend of the ‘quantified self’. For Fitbit, the next step in this health-focused approach would be to provide integrations between its devices and healthcare platforms, such as insurers and hospitals. Again, Apple has been active here, but Fitbit will hope to use its good reputation to gain access to these sorts of programs. It does seem that established brands will find it easier to work with the highly regulated and highly paranoid healthcare providers.

Child-friendly wearables are also a potential growth area for Fitbit, which has led it to launch the Fitbit Ace, a $100 band that is essentially a rebranded Fitbit Alta. It is designed to encourage kids to meet their exercise targets, and to get enough sleep, with parents able to set these goals. Fitbit rival Garmin has a similar product, called the Vivofit Junior.

Some parents will see the value in being able to monitor their children’s activity levels. Health programs in schools might also take a shine to the concept, but the lack of location tracking means that the Ace isn’t competing against GPS-enabled trackers that promise to keep kids safe – such as Trax, Runner-Up, Weenect, or AngelSense.

But away from Apple, Garmin, and Fitbit, the Android Wear ecosystem seems to have ground to a halt. Mobile World Congress was not a launch platform for any big new designs, and from what could be seen on the ground, wearables were definitely no longer front and center. They were hidden away at the edge of booths.

The smartphone vendors seem to have lost all enthusiasm for the platform, which last received a major update with v2.0 in February – the version that allowed a watch to operate in a standalone manner, without the need for tethering to a phone. Since the v2.0 addition of support for cellular connectivity, there hasn’t been a major announcement from any of the big Android wearable vendors.

Collectively, the two low power LTE variants should have drawn the eye of lots of wearables developers, thanks to LTE-M and NB-IoT’s capabilities for low power data connections. However, that interest still hasn’t materialized, and so it looks like a new wave of wearables embracing the two protocols isn’t going to break anytime soon. Instead, the momentum may only be a trickle.

In terms of finances, Fitbit is looking to counter a $46m loss in Q4 2017, on revenues of $571m, and a revenue warning that 2018 could be worse than Wall Street’s expectation. That news brought its share price down to the historic low of $4.78 – although that has now crept back up to $5.35, the price has steadily declined since December’s high of $7.14.

The fourth quarter was excellent for Apple’s Watch, according to IDC’s quarterly wearable reports. The firm estimates that Apple shipped 8m units leading up to Christmas, up 58%, while Fitbit sold 5.4m units. In Q4 2016, Fitbit had sold 6.5m units, although had also posted a loss of $146.3m on revenues of $573.8m. The Q1 2018 warning is that it will post between $240m to $255m, which is a long way from the analyst expectation of $340m.

But the pivot to smartwatches has boosted the average selling price of each device, up 20% to $102. But Fitbit has to find a way to turn that increase into stable profits – although it does have some $679m in cash in the bank, apparently. So while 2017 saw a net loss of $277m on revenues of $1.6bn, Fitbit will be hoping the later quarters convince Wall Street of its potential. Its recent acceptance into the US FDA’s digital health pre-certification program could go a long way here.

The other IDC figures found that Apple had won the top-spot in shipments back from Fitbit, which was pushed to second-place but still ahead of third-place Xiaomi. The global market grew around 10.3%, which is much lower than previous years such as 2016’s 27.3% increase. Apple had a 21% market share in Q4.

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