Smartwatch market grows thanks to mobile payments, lower pricing

Smartwatches now make up a third of all smart wearables sold in Australia, with Telsyte attributing the growth to mobile contactless payments, health and fitness apps, and lower pricing.

Technology industry analyst firm Telsyte has revealed new figures for the sale of smartwatches in the Australian market, saying that they now account for a third of all smart wearables.

The Telsyte Australian Smartphone & Wearable Devices Market Study 2016-2020 showed that while the initial success of smartwatches in Australia was "modest", sales in the first half of calendar 2016 increased by 89 percent year on year.

"As smartphone replacement cycles have lengthened, consumers are turning to other gadgets, and smartwatches have started to capture the imagination," Telsyte managing director Foad Fadaghi said.

"We might be seeing the beginning of a substitution effect where consumers are choosing a smartwatch over a new smartphone."

The Apple Watch led in the category, holding down more than 50 percent of the smart wearables market share, followed by the Samsung Gear and the Fitbit Blaze.

The growth in smartwatches was attributed by Telsyte to uptake of mobile contactless payments through Android Pay, Apple Pay, and Samsung Pay using a smartwatch; a reduction in pricing; increased availability; "more stylish designs"; and usage of health and fitness apps.

mCareWatch, which bills itself as an e-health caring technology expert, said wearables could also be used to track the health and safety of older people, particularly those with dementia.

"New technology with wearable applications is increasingly being used to help older people live independently, stay healthy, and, perhaps most important of all, stay connected to their loved ones, carers, and healthcare providers," mCareWatch founder Peter Apostolopoulos said on Tuesday.

"With the technology we have now, that kind of massive risk and upset and a whole lot of others are avoidable."

Telsyte has predicted smart wearables to be worn by 37 percent of all Australians as of 2020, with growth to be driven by Apple's second-generation watch around 2017-18, along with greater uptake of mobile payments and lower cost of units.

A year ago, Telsyte said the premium price Apple charges for its wearables was slowing the industry's growth.

"The Apple watch remains a luxury gadget, with its sales price typically more than twice the average of rival Android-compatible smartwatches," Fadaghi said at the time.

"It is difficult to see mass market consumers paying as much as premium tablets or smartphones for wearable technology that does not have significant new or unique features.

"The ideal price point, we think, is AU$200 to AU$300 for both individual buyers and for the gifting market."

Telsyte has also provided an update on the state of the Australian smartphone market; 3.8 million units were sold, up 3.8 percent year on year. As in 2014 and 2015, Android has maintained dominance, accounting for 62 percent of sales thanks to having devices in both the high end -- such as the Huawei-built Google Nexus 6P and the Samsung Galaxy S7 -- and the low end.

As of June 30, Samsung led the Australian smartphone market, followed by Apple and Huawei, with the three companies accounting for 79 percent of all smartphones sold. Apple is also expected to grow its market share during the second half of the year off the back of the launch of the iPhone 7.

"Android had a good run in the first half of 2016; however, trend and purchase intention data indicates Apple consumers are on the verge of an iPhone upgrade cycle," Telsyte senior analyst Alvin Lee said.

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