U.S. Wearables Market Struggles, UAA, ADDYY and ASCCF Focus on Software

The U.S. wearables market (i.e. smart watches, fitness trackers) has struggled to reach the mainstream, with less than 20% of adults expected to use wearable tech at least once/mo. in 2018. eMarketer projects wearable use will increase 11.9% YOY over the coming 12 months, but that growth percentage is down from 15.2% YOY in 2017 (and expected to slow to 7.7% in 2019). Smart watch sales will drive the increased usage, accounting for 55% of all wearables by 2022 (up from 21% in ’16). Not everyone is convinced wearables have reached peak growth though, IDC anticipates the number of devices shipped will double by 2021 (accounting for higher adoption rates in China) and CCS Insight anticipates wearables becoming a $34 billion industry by 2020.

Howie Long-Short: Under Armour (UAA) and Adidas (ADDYY) have both recently exited the wearable tech space. UAA announced in November it would no longer manufacture fitness trackers, instead building software to integrate with AAPL and Samsung (5930) products, while earlier this month ADDYY announced that it was closing its Digital Sports Division to re-shift its focus on app platforms. While those exits don’t bode well for IDC & CCS’ projections, the wearables market has one potentially game-changing card to play; if it can generate meaningful data reflecting the health benefits associated with usage, subsidized (i.e. insurance) cost programs (which would theoretically result in increased sales) could follow.

Fan MarinoAsics (ASCCF) also recently entered the fitness software space, introducing a mobile application that offers consumers on-demand workouts. Entitled Asics Studio, professional trainers guide users through workouts that are synced with pre-selected playlists to recreate the atmosphere of a boutique fitness class. Strength training, treadmill, fusion (strength and cardio package), outdoor running, elliptical and indoor cycling classes are all available for $9.99/mo. The latest company looking to cash in on the wearable data and analytics market, expected to be worth $838 million by 2022.

Wearables still slow to catch on in the U.S.

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Asics (OTC: ASCCF) is working to rebrand itself from a niche footwear manufacturer to a mainstream health and wellness company. DJ Steve Aoki is the lead spokesman for the new campaign, “I move me”, that uses music and the power of movement to promote a diverse range of activewear products; not necessarily designed for athletes. The campaign’s marketing strategy will be all digital as the brand looks to broaden its appeal with younger Americans.

Howie Long-Short: Running shoes sales are flat to slightly declining so the company needs to find other avenues for growth. An athleisure market with room to grow is a good place to start. The company also generates just 1/3 of their revenue from the U.S. If you’re going to build a brand targeting “fitness minded consumers”, it makes sense to design campaigns that appeal to consumers within the world’s largest sportswear market.

Fan MarinoASCCF has their work cut out for them. They’re looking to play in a crowded space, that’s only getting more crowded with Amazon’s entry. They also haven’t connected with American millennials. Just 2% of upper income teens and just 1% of average-income teens listed the brand, as their favorite (Piper Jaffray’s Taking Stock of Teens survey). Fun Fact: DJ Steve Aoki is the son of Rocky Aoki, founder of the hibachi chain Benihana.