The upcoming 2024 has been highlighted as a pivotal year for the smartwatch sector with both industry executives and analysts predicting that some trader brands could exit the market completely due to decreasing profits and slim margins.

The smartwatch industry is currently stuck in a vicious cycle. It's treated as a part of the fleeting lifestyle fashion trade, despite its basis in technology. Brands face frequent product launches with minor adjustments and low pricing, while simultaneously dealing with the rise in marketing costs.

In the world of fashion, brands maintain a hefty margin of 60-65% to adjust for possible product variants, some of which may not even sell. However, in the smartwatch market where average profit margins are a slim 20-25%, it begins to eat into your unit economics, explained Sameer Mehta, chief executive at Imagine Marketing behind the Boat electronics brand.

Sadly, this business cycle may adversely impact those invested in trading. Brands that place large orders to original device manufacturers in China and then resell in India for slight profit could potentially be looking at closing shop or pivoting to other sectors as profits begin to dwindle.

Interestingly, you might find that some wearables brands have numerous apps in the app store simply because they procure from a variety of suppliers. Sometimes, identical products are spotted being sold by different brands in China. Without investing in research and manufacturing, it would be a tough call for wearable brands to sustain in the coming years,” said a senior executive at a wearables brand.

Meanwhile, the pace of growth for smartwatch shipments, though the fastest among wearables, has dramatically dipped. As per IDC India, the segment saw 41% growth in the third quarter of 2023 to 16.9 million units. This was a stark contrast to the 179% hike during the same period in 2022 that resulted in 12 million units. The average cost of smartwatches dropped 35.3% to $26.70, down from $41.90 during the year.

The market boom seems to be tapering off as consumers shift their demands to better experiences once the initial hype has faded. People today are seeking products that meet their tracking metrics, have interactive, community-designed watch faces, and overall, a product that satisfies their requirements in a holistic way, Mehta explained.