Move Into Wearable Tech and Smartwatches Proves Fossil Is No Dinosaur

Fossil was at a crossroads. With $3 billion in revenue and a leadership position in fashion timepieces, they were about to have their ‘Blockbuster moment’.

You’ll remember that time when Netflix called on Blockbuster offering the streaming service as an ideal tuck-in for Blockbuster, the board failed to see the direction the video industry was heading and literally steered themselves into oblivion.

For Fossil, the exact timing of their ‘Blockbuster moment’ is known only to those inside the boardroom.  But they chose differently.

Launching 40 hybrid smartwatches for the likes of Kate Spade, Diesel and Armani, Fossil reasserted itself to capture interest and market share in the rapidly growing Smart Watch sector of tech wearables.

In case you’ve been living under a rock for the last ten years, tech wearables are one of the most important consumer, medical and data businesses, expected to grow 50% in the next three years.  Wearable technology has grown from it’s infancy with the launch of Fitbit in 2007, to today’s tech wearables like Leaf that look more like fashion forward jewelry than a gadget.

Fast-forward to today and both Fitbit and Fossil are down massively since Fitbit’s IPO in 2015.  Fitbit has dropped 81% and Fossil has dropped 70%.  When the tech wearables sector is booming and consumers are literally falling in love with their wearables, how can these companies be so hard hit?  And where are they likely to head next?

Like all high-growth businesses, new entrants are in a race to join the fast money boom.  But the initial years are like a giant sorting machine that eats up the weak while the smart, and strong, feast on their market share.

In addition to their poor stock market performance, both Fitbit and Fossil have one other thing in common: each has about $500 million in cash that they can use to feed the burn while they regroup or put towards a sensible acquisition to help ratchet the company forward to the next level.

Lessons From History

The ditch is full of corpses from the past who made the wrong choice.  Think Blackberry.  Long in denial about it’s status as the creator of one of the first smart tech devices, it had to use it’s cash to keep itself on life support while reinventing their relevance and presence in whatever table scraps were left.

From our experience covering tech wearables, the shifts we have seen look pretty predictable in hindsight.  People love gadgets. They fall in love with them, and more, as they help shape their life and social experiences.  But tech wearables are evolving to a different place.  Consumers may want a GPS enabled Smart Watch for runnning, but they aren’t going to wear it to track their fitness vitals at the office, around home or out at the theatre.

The current landscape dictates that consumers don’t yet have their perfect choice.  They’re forced to monitor their activity through multiple devices and multiple apps.  We predict that the apps will win this next decade.  This winning app will be OS agnostic, working on both iOS and Android, maybe even working across platforms.

Next it will speak to the future of devices.  Wear an Apple Watch to the office? Check.  Run at lunch with your LG Watch Sport? Check. After dinner time with friends wearing your Leaf? Check.

The first years of tech always end up with a divergent race to see who has built the more popular mousetrap, but it always converges back to common themes.  We believe that one of the dominating themes will be the App.

So where do we go from here?  What’s next for Fossil and Fitbit?  As the early leader that created the sector, Fitbit has to become a Fossil.

Fossil has the luxury of not trying to defend a space it created, but is now moving to capture share in someone else’s space.  They have the power of partnerships with other brands that Fitbit lacks, and instead of defending a sector Fossil is embracing it’s freedom to move into new areas.

How these two companies will emerge in the next year or two comes down to many factors, but there is nothing more true than the anecdotes.  Ask my wife if she wants a Leaf, the Smart Jewelry made by Bellacraft , and she says a resounding “YES” .  Ask her if she wants a Kate Spade Smart Watch that fills in the gaps when she’s not wearing her Fitbit and she’s “all in”.

But ask her if she wants three different apps to manage her wellness goals and she’s out.  Full stop.

Integration. Convergence. Consolidation.  This is the future of wearable tech.  We think Fossil gets this concept and we’re looking forward to seeing them capitalize on leadership opportunities as they build and expand on partnerships in tech wearables.

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