Taking the bullish case that each wearable user will download at least 50 apps on to their device, 2 billion apps will be active on these devices.
Selling Devices Is Much More Lucrative Than Selling AppsĪssuming an expiry period of around two years for a wearable device, around 40 million wearables will be in active use by 2017. However, deciding to focus on its core competency-sports and training apparel-instead of trying its hand at electronics hardware manufacturing and racking up losses, might not be such a bad decision, especially if Nike can use its fitness tracking software to drive more people towards its products. This means that the industry is primed for a near five-fold growth from its current market size of $3-5 billion to $25 billion by 2017. Considering that such a big opportunity exists, it seems surprising that Nike looks like it has decided to concede defeat even before a fight begins for share of this market. Research firm Canalys estimates that the smart band segment will reach 8 million annual shipments in 2014, growing to more than 23 million by 2015 and over 45 million by 2017. Last year, Credit Suisse issued a report that identified wearables technology as ripe for major growth having hit “an inflection point in adoption”. From 200,000 in the first half of 2013, wearable sales jumped to 1.6 million in the second half of the year, a 700% increase. This move comes as the wearable gadget category is getting populated, with electronics manufacturers like Samsung and Apple having entered or looking to enter the category. The retailer also launched a software incubator called the Fuel Lab in the same week to help hardware makers integrate its fitness measurement system, Nike Fuel, into their devices. From now on, it seems that Nike will shift its focus to fitness software, like its Nike+ API, which can be integrated by other hardware makers into their devices.
The company explained its decision by saying that the lay off was part of a re-alignment of resources with business priorities, hinting that its priorities in its Digital Sport Businaess are undergoing a change. Last month, Nike laid off people in its hardware division, which makes the fitness tracking wearable device FuelBand.
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