If last Christmas was all about tablets, the buzzword this Yuletide season looks set to be 'wearable technology'. Sales of such gadgets are expected to more than triple in the UK over the festive period to reach some £105m, according to the Centre for Retail Research.
There's no denying that the market has ballooned in recent months, albeit from a low base. A swathe of exciting products, some akin to the stuff of science fiction, but also practical, informative and cool, have either launched or are due to be unveiled within the next few months. Google, for instance, is soon to introduce high-tech 'smart glasses' to the retail market. However, priced at £1,000 a pop, they're out of reach for the average consumer. Then there are 'smart watches', such as Pebble, and the hotly anticipated Apple Watch, due out next spring. These nifty devices connect to your emails and text messages and offer a raft of other features. Pebble, for instance, lets you add apps that can do just about anything: control lights, thermostats, televisions and sound systems. Smart watches account for just 11 per cent of the wearable tech market, but this year they're expected to be the biggest area of growth, with sales up 667 per cent in 2014.
But, by far the biggest and most popular type of wearable tech currently on the market is the kind that monitors your wellbeing: fitness, sleep, heart rate - you name it. Health and fitness trackers account for roughly 39 per cent of the wearables market. They offer all sorts of information, from how many steps you've made in a day to the number of calories you've burned, all of course, seamlessly connected to your smartphone or cloud computing. Brands include Nike's Fuelband, Jawbone, and a number of other devices from the likes of Samsung, Huawei, Sony and Motorola - to name just a few. Sales of these items have soared this year - rising 50 per cent in volume in the second quarter alone according to data from market research firm GfK - and have been responsible for really fuelling take-up and interest in wearable tech. One purveyor of such products, Fitbug (FITB), is listed on the junior Aim market and has seen its share price rise from 3.9p to 14p in less than a month, following a wave of contract wins. The firm's digital health platform, Kiqplan, tracks activity and provides structured action plans to help people slim down and lead healthier lives.
So what does this mean for investors? Well, wearable technology is where it's at, and the companies behind these gadgets - and those who sell them - look like they'll do a fine trade this Christmas.
Erol Sukan, Business Director for GfK, said: "It's clear that as new brands have entered the market we have seen prices begin to rise across most wearables, however this is generally because manufacturers are positioning their first entries into the market quite high. As we are now starting the long lead-up to Christmas we could see many brands delivering price declines ahead of the festive season, or even introducing more entry price point models. Wearables will be a big gifting market, with Christmas 2014 the first true test of this burgeoning product."
Overall, it looks as if digital products more generally are set to have another bumper Christmas. In fact, recent data from Ernst & Young backs this up. Its research suggests that while consumer spending will remain muted this year and next, shoppers have begun to splash out on discretionary items, notably technology and communication. It forecasts that annual growth in spending on recreation and culture, including TVs and audio visual equipment, will jump from an average of 1.7 per cent between 2008 and 2013, to 5.1 per cent this year and 5.4 per cent next.
Similarly, communications spending is forecast to increase by 4.5 per cent in 2014, before peaking at 5 per cent next year, reflecting further advances in the smartphone revolution. This is up significantly from the 0.3 per cent average annual growth since 2008. "The spending growth on consumer technology reflects not just a recovery in spending power but also rapid advancements in technology that have driven consumer demand for the latest products, such as wearable devices," says EY's head of retail, Julie Carlyle.
So who will stand to benefit from the digital and wearable Christmas? Clearly the companies behind the products, such as Apple, Samsung, Google and Fitbug. But on the retail side, this could include outfits such as DixonsCarphone (DC.) and Home Retail Group's (HOME) Argos and even Game Digital (GAME). Halfords (HFD) stocks a fitness tracker called Fitbit and will no doubt begin stocking all sorts of wearable tech related to cycling. Sainsbury (SBRY) recently signed a deal to stock Fitbug products in its stores. Watch this space.
