What does Nike getting out of the FuelBand business mean?


Nike + FuelBand

In non-shocking news (at least to those who follow Deloitte Predictions) Nike looks like it is getting out of the fitness band hardware business. That doesn’t matter to Nike of course: fitness bands were always a very small part of their business!

As we said in our 2014 TMT Prediction on wearables, making wrist-mounted connected devices is likely to be the toughest wearable market over time. Fitness bands are the opposite of ‘sticky’ technology: people may use them at first, but they then grow bored rapidly. As I have often said, fitness bands are the high tech equivalent of the January gym membership! Today’s news just confirms how tough this space is.

Another interesting aspect is that predicting the future is not that hard, if you know what to look for. As part of drafting the prediction, lead author Paul Lee and I were trying to figure out how many fitness bands (from all the various manufacturers) had sold in 2012 and 2013. There was some press release talking about Nike FuelBand and it having 18 million users. But we quickly noticed the EXACT language on the press release: across all the various Nike+ fitness tracking services there were 18 million subs, but nowhere did it say how many actual FuelBands had been sold. When companies refuse to disclose how many units have been sold – whether eReaders or fitness bands or ANYTHING – that is almost always a negative indicator! And in this case, it was a useful bellwether on the future of the product.

[Edited to add]

By the way, it now appears that Nike may not quite have killed off the FuelBand yet!

Based on some Twitter conversations, I thought I would add some detail to my thinking on what this means for wearables, specifically fitness bands. Some people had said that just because one manufacturer may be getting out of the wrist-mounted wearables business isn’t a negative indicator for the category as a whole.

Respectfully, I disagree. There are a limited number of consumer devices that have the potential to be the Next Big Thing, and many people think that fitness bands could be one of them. There are industry reports that talk about over 100 million such devices being sold in the near term, as opposed to our much more conservative Deloitte forecast of single digit millions.

If you look at the early days of some consumer categories like smartphones, tablets, and HDTV sets, manufacturers were all trying to grab a piece of the market. When new technologies are in their hypergrowth phase, the manufacturers are all over the market, continuing to invest in the hope of ending up as a significant player.

For one of the top five fitness band manufacturers to look like they are exiting the business tells us that they don’t believe that these devices are a hypergrowth market, at least in terms of the current technology. Nike is a great company, and I have heard nothing but good things about the FuelBand from friends who use them. So I continue to believe that yesterday’s decision to lay off most of the FuelBand employees should not be viewed as anything other than a vote of non-confidence in the pedometer-based fitness wearable industry.

Which doesn’t mean that millions of units will not be sold, or that millions of people won’t happily use the technology to get fit, lose weight and generally quantify themselves. But I think it does mean that it won’t be tens or hundreds of millions of people. As a reminder, this year will see 1.2 billion smartphones sold. 285 million PCs, and another 285 million tablets. Even the 60 year old TV set industry will push nearly 250 million units off the shelves, and video gaming consoles will be close to 50 million units.

In that context (and at a fairly low price point) I am standing by our research that suggests that fitness bands are not going to be the Next Big Thing.


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