When Adidas bought Runtastic for $240 million in 2015, the fitness giant was pretty obviously playing catchup. The company had just watched Under Armour, a relative upstart in the sports apparel world, spend $710 million on three of the biggest fitness apps on the market: MapMyRun, MapMyFitness, and Endomondo. Less than a year later, Japanese shoe brand ASICS would snap up Runkeeper for $85 million. Nike was the one major sports apparel company to sit out the trend, perhaps because its digital portfolio was already comparatively robust.
Now, not even two years after that gold rush for connected fitness, the landscape looks awfully different. Under Armour has seen the last of its app founders depart the company. While it's still supporting the apps it bought, it abandoned HealthBox, its brief foray into connected fitness hardware. Nike has long since abandoned its Nike Fuelband wearable. And Adidas is shuttering its digital business unit, a move that seems likely to get the company entirely out of fitness hardware, though this isn't entirely clear. (Runtastic Orbit trackers are currently heavily discounted on the company's website, which is never a good sign).
While none of these companies have completely halted their digital fitness efforts, there's certainly an overall theme of scaling back, especially when it comes to hardware. In fact, assuming Adidas is getting out of hardware, that means that pretty much all of the major sports apparel companies have given up on the wearables space. They join a long list of other companies (Intel, Jawbone, and Microsoft to name a few) that ultimately couldn't cut it in fitness wearables.
Even the winners in this space are showing signs of struggling. According to Wareable, Fitbit Ionic's holiday sales seem to be under target, with the company already discounting the smartwatch at many retailers — and the poor performance hasn't gone unnoticed by investors.
"I think the industry is still struggling to find real, meaningful points of reference with consumers," Dan Ledger, who closely follows the wearables space in his role as founder of consultancy firm Path Collaborative, told MobiHealthNews. "...You certainly hear anecdotes of people who had Fitbit and lost all this weight or that runner who has been using technology to optimize their training. So there are these pockets of resonance out there, but it hasn’t really been a success as a mass market product like a smartphone — like a lot of these companies were expecting when they were reading the tea leaves four or five years ago."
Ledger says that there are several explanations for the mass abandonment of wearables. One is that basic tracker features, and even more advanced ones like heart rate, have rapidly commodified, with reference designs available in Asia. The production cost of a basic tracker is also quite cheap. Another is that it takes very specific software features to create devices that really engage consumers and do so over a long period of time, and only a handful of vendors, including Fitbit and Apple, have cracked that nut effectively.
"Listening to some of Fitbit’s analyst calls, their R&D is hundreds of employees and they have four or five products," Ledger said. "That ratio gives you a sense of the nature of the products we’re up against here and how much investment is [necessary] to really get to that next level of breakthrough performance or functionality beyond sensing heart rate, movement, and skin temperature and turning back some first order derivative information about it."
Jordan Rice, senior director of Nike NXT Smart Systems Engineering, spoke at a recent conference about Nike's decision to abandon the wearables space. He said something interesting at the time — that he ultimately regretted wandering so far from Nike's core identity.
"Nike had gone through this process of creating consumer electronics gadgets and things that were maybe not central to its original core,” he said at the event. “You could argue maybe that was a great innovation experience. You could argue that we maybe lost our way a little bit. You could maybe argue that that wasn’t authentic to who we were. But it left us with a bit of a hangover — me included.”
Ultimately, as the old truism goes, hardware is hard. And it's even harder when it's not a company's primary business. While Fitbit can commit the resources to wearables when they make up its whole business, companies like Under Armour, Adidas, and Nike have found that wearables are not something that's easy to add on top of an apparel business.