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Why Samsung’s Smartwatch Strategy Is Limiting Its Penetration

Group Gear 2 Neo

In 2013, Mobile phone manufacturers shipped over 1.8 billion devices to retail stores around the world. Even though this does not represent the number of phones sold, it is still a huge number to be ignored. 55% of those were Smartphones meaning that just over 1 billion Smartphones shipped last year.

Samsung managed to ship 313.9 million Smartphones last year to control 31.3% stake of the market share. This is quite huge for a company like Samsung that has seen continuous growth over the past few years. Just so you know, this number is for all Samsung devices including the mid range and entry level Smartphones.

Samsung’s Smartwatch Agenda

As for its smartwatches, Samsung has had a good start with the original Galaxy Gear shipping over 800,000 units. These figures were released by Samsung sometime last year so they may have changed as of now.

The original Galaxy Gear was only limited to a few high-end Galaxy devices including the Note 3 and the Galaxy S4. This is what I believe is limiting the penetration of Samsung’s smartwatches. As we try to make sense of the sales figures, we can deduce that 0.25% of all Samsung Smartphone owners bought the Galaxy Gear. That means, out of every four Samsung Smartphone owners, one has a Galaxy Gear. Not bad since the Gear has been in the market for less than a year.

samsung_galaxy_gear_smartwatch_sg_252-820x420

Samsung locked the Galaxy Gear down to a few Galaxy devices probably to improve sales of these Galaxy devices and the Gear itself. This may have turned out Ok but we should consider that other people may not be big fans of Samsung Smartphones but they still want the Galaxy Gear. Locking them out, is not a good idea according to me. This is a market share that Samsung is missing and the entry of new Smartwatches from companies such as LG and Motorola will make it even harder for Samsung to penetrate.

Samsung still has a chance to grow in the Smartwatch market but these new entrants will most likely slow its growth. To be honest, Samsung had a chance but they blew it.

With the new Gear 2 and the Gear 2 Neo running on Tizen and with no cross platform support, I still think Samsung has no bright future unless they change their whole strategy and allow support for other devices. I have no problem with the Gear 2 running on Tizen per se but I just hope Samsung decides to open up its Smartwatches to support all android Smartphones and even other Windows phone and iOS.

Smartwatch Numbers Predictions

Throughout 2013, 2 million smartwatches were sold worldwide with Samsung selling 800,000 of those. This means that the company had 40% of the market share. Quite a large piece of the pie if you ask me, this is even bigger than its control in the Smartphone market.

According to Forbes Magazine, Smartwatch sales figures are expected to top 15 million units this year. If Samsung managed to control 40% of the Smartwatch market by locking their smartwatches to a few Galaxy devices, what percentage will they be able to control if they open them up? At this point we are assuming that smartwatches from other manufacturers will not hit the market till the last few months of 2014. If that is so, Samsung will have had a more than enough time to gain new customers.

lg-g-watch

So back to the 40% figure, if Samsung opens up their smartwatches to other platform, they will definitely gain new customers but the entry of new smartwatches will also lead to loss of customers.

Hypothetically speaking, let’s say for some reason, Samsung losses 7% of its Smartwatch market share and ends up with 33% of the 15 Million expected units. This gives them a commanding lead of 4,950,000 smartwatches in the market. This is if only the Gear 2 is opened up to other devices.

The main reason I assumed the Gear 2 is not going to gain as much is because of the entry of other players in the market who may dilute its share. 2014 has been said to be the year of smartwatches and every one will try to beat the Gear 2. The advantage the Gear 2 has is it is already in the market even before other manufacturers announce their own versions.

On the other hand, if Samsung continues to lock its smartwatches, they might lose a lot to other manufacturers and end up with a lower number the one above.

Conclusion

Samsung is really losing by keeping other Smartwatch owners out. Most of these users may not be using the high end Galaxy Smartphones but they would still want to try the smartwatches from Samsung. The market is still small and Samsung has a chance to make a mark in it but that will only happen if they open up their devices.

To be honest the entry of smartwatches from LG and Motorola (they look gorgeous by the way) should scare Samsung, as people, including me, will opt for these new ones instead of the monotonous Gears.

Samsung needs to completely change their strategy or risk losing in this sector.

Assumptions

I assumed that Samsung will gain new customers if they open their current Gear devices. Even though that is the case, they will still loose around 7% of the market share. This number was just a wild assumption and was not influenced by any research.

About author

Editor at TechArena. I cover all things technology and review new gadgets as I get them. You can reach me on email: kaluka@techarena.co.ke
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