Nike’s FuelBand runs into trouble
The race to dominate the nascent wearable technology market is already witnessing early stumbles, even before a potential winner has finished limbering up.
Nike is considering pulling its FuelBand device out of the competition ahead of Apple’s entry later this year. Following a report on tech news site CNET, Nike confirmed it was laying off staff from its digital sports team and refused to commit to future device launches, although it insisted the FuelBand remained an “important part of our business”.
Health-tracking gadgets from the likes of Nike, Fitbit, and Jawbone measure how far the wearer walks or runs in a day, the vigour of a workout and the quality of their sleep. Such devices have been tipped as the next big thing in technology after the smartphone, yet some think Apple will trounce them all when it launches its much-anticipated “iWatch”.
Sources familiar with Nike’s plans say it will focus on making apps instead of the higher-priced but lower-margin FuelBand hardware, after growing an online community of 20m people.
The company’s decision is complicated by the longstanding partnership and board relationships between Apple and Nike. Tim Cook, Apple’s chief executive, has served on Nike’s board since 2005, and in 2006, the two companies announced a partnership with the Nike+iPod product.
The move follows Fitbit’s recent recall of its million-selling Force product after thousands of complaints that the wristband caused skin irritation. That, in turn, echoed Jawbone’s 2011 recall of its fitness wristband, Up, due to faulty hardware.
However, Nike’s withdrawal marks the first serious test of whether technology, sports or fashion companies will dominate wearable devices, which have so far seen more hype than substance. Analysts say that Nike conceding defeat in hardware could send a warning to other fashion brands considering joining the race.
The field is still wide open in the fitness tracker market, which analysts at IHS predict will reach $2.3bn in revenues by 2017, through cumulative device sales of 250m over the next five years.
NPD, a researcher which tracks sales in general retailers but not from in-house stores such as the NikeTown, put Fitbit as the clear leader of the $330m US market last year, with Nike lagging behind in third place.
Ben Bajarin, a technology analyst at Creative Strategies, says consumers quickly tire of the simple activity data that today’s devices offer.
“For wearables to succeed, consumers will need to find value in the data the device is recording,” said Mr Bajarin. “Apple is setting up the iPhone to be the centre of this wearable accessory ecosystem.”
The early activity tracker in Nike running shoes allowed information on a workout’s time, distance and calories to be shown on an iPod screen. Eight years later, the $150 FuelBand offered broadly similar capabilities, with overall activity measured in the company's proprietary “NikeFuel” points.
Meanwhile, Apple’s so-called iWatch, expected to launch later this year, is rumoured to track much more detailed fitness information, including heart rate and even blood health.
An accompanying app dubbed “Healthbook” will collect information from other sources in a single Apple service, much like the iPhone’s existing Passbook digital wallet for tickets and loyalty cards, according to reports.
Market-watchers have said that the longstanding relationship between Apple and Nike would be tested by this coming collision between their products.
As our Digital Sport priorities evolve, we expect to make changes within the team
- Nike
Nonetheless, the collaboration between the two companies has ostensibly remained strong. Nike launched a new motion-tracking app onstage alongside Apple at last year’s debut of the iPhone 5s.
The question-mark over the FuelBand’s fate will serve as a warning to other clothing brands that had hoped their experience in fashion or fitness might win out over the current crop of wearable devices, which have often been criticised for poor aesthetics or comfort.
It also highlights the complexities of hardware manufacturing for non-tech specialists, especially in wearable technology.
A Nike spokesperson said it would change the looks of the latest “SE” version of the FuelBand, with new colours, but would not commit to updating the underlying hardware.
“As a fast-paced, global business we continually align resources with business priorities,” Nike said.
“As our Digital Sport priorities evolve, we expect to make changes within the team and there will be a small number of lay-offs. We do not comment on individual employment matters.”
Nike added: “The Nike+ FuelBand SE remains an important part of our business. We will continue to improve the Nike+ FuelBand App, launch new METALUXE colours, and we will sell and support the Nike+ FuelBand SE for the foreseeable future.”
Apple declined to comment.
Nike’s move could avoid a stand-off similar to the conflict Apple faced with Google a few years ago. Google’s then-chief Eric Schmidt left Apple’s board in 2009 after its Android smartphone software came into closer competition with the iPhone. Apple responded by ejecting Google Maps from its devices.
“Nike, which is arguably one of the longest-running participants in fitness devices, is getting out. What does that tell us about prospects?” said Jan Dawson, tech analyst with Jackdaw, on Twitter. “If it was selling well enough, they’d keep selling it. Suspect it isn’t.”