Category Archives: Venture Capital

Fitbit, IPO Superstar Struggling for Survival

Todd Benschneider, Qingqi Meng, Jesse Rubin, Lisa Velesko, Xueying Zou

University of South Florida
February 3, 2018

 Company Overview

Fitbit was founded in 2007 in San Francisco, California by James Park and Eric Friedman with a vision to help people lead healthier, more active lives by empowering them with data to reach their fitness goals. Since its founding, Fitbit has become the leading global wearables brand and its products have helped users track and get motivated for everyday health and fitness. Fitbit offers an innovative lineup of popular activity trackers including the Fitbit Surge, Fitbit Blaze, Fitbit Charge 2, Alta HR, Alta, Fitbit Flex 2, Fitbit One and Fitbit Zip, as well as an accessory line featuring the Fitbit Ionic smartwatch, Fitbit Flyer wireless headphones and Fitbit Aria and Fitbit Aria 2 Wi-Fi Smart Scales. Fitbit products are carried in 46,000 retail stores across 78 countries around the globe. Fitbit’s platform delivers personalized experiences, insights, and guidance through leading software and interactive tools. The success of these functionalities has grown the Fitbit social community to over 25 million active users in 2017. The International Data Corporation (IDC) forecasts that the wearables market will nearly double by 2021, leaving the door open for Fitbit to grow and continue its market leading footprint in this category.

Founders

James Park, who serves as the CEO and President of Fitbit, was a Harvard dropout with a computer science background. He was also co-founder of two tech startups, Windup Labs and Epesi Technologies, prior to founding Fitbit. His second startup, Windup Labs, an online photo-sharing company, was acquired by CNET Networks in 2005. James then went on to serve as the director of product development at CNET. James’s diverse background in tech startups also included a stint at Morgan Stanley where he built trading software and developed trading strategies for the bank.

Eric Friedman serves at the CTO of Fitbit. He was a co-founder of both Epesi Technologies and Windup Labs with James Park, and served as an engineer manager at CNET following Windup’s acquisition. Eric earned both his undergraduate and masters degrees in computer science from Yale University.

Neither Park nor Friedman had any manufacturing experience when they came up with the idea to create a wearable product that would change the way people move. They had attended and spoke at the TechCrunch50 conference in 2008, hoping to get 50 preorders. Instead, in one day they received 2,000 pre-orders for the product launching their idea into a true product that had real demand. They had spent several months in Asia looking at suppliers and, according to the founders, nearly crashed and burned seven times (Marshall, 2016). They were already serial entrepreneurs at this point, which gave them an advantage as they traversed the struggles of launching and perfecting a new product.

Financing History

After its founding in 2007, Fitbit went through several rounds of successful seed funding. Funding came primarily from venture capital firms to fund its high growth as an early stage fitness technology company.  The founders were able to raise an initial four hundred- thousand dollars from friends and family to get their idea up and running, but the cash ran out quickly (“Fireside Chat with Fitbit”, 2017). In October 2008, Fitbit closed on its first round of Series A funding, raising $2 million in venture capital from True Ventures, SoftTech VC and several angel investors. This was the company’s first round of institutional funding and the company reportedly met with 40 VCs only to be rejected by all of them (“Fireside Chat with Fitbit”, 2017). Two years later, in September 2010, Fitbit closed a Series B funding round of approximately $9 million. As the company continued to innovate and introduce new products to the market, its need for additional capital also continued. In January 2012, Fitbit raised an additional $12 million in a Series C funding round from its existing investors Foundry Group, True Ventures, SoftTech VC and Felicis Ventures.

A little more than a year later, in September 2013, Fitbit was looking to raise additional capital at a $300 million valuation and secured $43 million in Series D funding from Qualcomm Ventures, Sapphire Ventures and SoftBank Capital, along with its existing shareholders Foundry Group and True Ventures. Only six years after its founding, the company had grown exponentially and raised nearly $66 million in seed capital to fund its operations, innovation and growth and was on its way to going public. Finally, in June 2015, Fitbit completed its Initial Public Offering (IPO) on the New York Stock Exchange at $20 per share, raising $731.5 million in capital. The IPO was comprised of 22,387,500 million new shares offered by Fitbit for a total of $447.75 million in fresh capital for the company and 14,187,500 million shares offered by the selling shareholders. This was the largest ever IPO at the time for a company dedicated to wearable technology. On its first day of trading, the shares of the company popped by 54% and again by 20% on the second day of trading on high demand and trading volume on the NYSE. It is important to note that Fitbit took advantage of the Jumpstart Our Business Startups Act (JOBS Act) of 2012 and registered as an “emerging growth company” (revenues less than $1 billion). This action eased the financial disclosure requirements, thus lowering the cost of going public. Just five months after the IPO closed, Fitbit and its shareholders once again went back to the capital markets and registered a follow-on offering in November 2015.

Unfortunately, market demand for the company’s shares had declined when the follow-on was initiated, which led to the offering being downsized from 7 million to 3 million new shares plus 14 million shares being sold down by current holders. Fitbit was still able to raise $87 million in fresh capital at a $29.00 per share offer price to use for potential acquisitions, working capital and other general corporate purposes, including research and development, sales and marketing activities, general and administrative matters and capital expenditures. Fitbit has not raised any additional equity capital since 2015, but instead has seen its stock price slide to under $6 per share as of January 2018 and its market cap drop from over $6 billion at IPO to under $1.5 billion.

Board of Directors 

Fitbit’s board of directors is comprised of two insider executives and five outside directors. According to Investopedia, the average corporate board size is 9.2 members, so Fitbit may have fewer advisors on its board than its competition. It is important that the founders and company executives surround themselves by intelligent individuals who can help guide the company through its growth and a period of increased competition. Moreover, as the competition in the wearables space increased significantly since the company went public with the introduction of the Apple Watch and other comparable devices, the company will need sound advice for staying competitive. The following table shows the individuals that make up Fitbit’s current board of directors and the important reasoning behind some of their selections as a board member:

Board Member Joined Board Background Reason for Board Selection
James Park Day 1 CEO and President of Fitbit Chairman of the board
Eric Friedman Day 1 CTO of Fitbit Executive Officer of the board
Christopher Paisley January 2015 Executive Professor of Accounting at Santa Clara University. Christopher also sits on the board of 4 corporations in addition to Fitbit Extensive board and operational experience
Laura Alber June 2016 Current President and CEO of Williams-Sonoma Extensive retail industry, merchandising, and operational experience
Jonathan Callaghan September 2008 Founder and Managing Partner of True Ventures Extensive experience with technology companies
Glenda Flanagan June 2016 CFO Whole Foods Market Extensive experience with leading consumer and health-related brands and expertise and background regarding accounting and financial matters
Steven Murray June 2013 Partner at SoftBank Capital Extensive experience with technology companies

 

 

FITBIT’S GROWTH CURVE 

Fitbit’s formation in 2007 was inspired by the fitness potential of the 2006 release of the Nintendo Wii. Park theorized that exercise data could be harvested from the Wii game sessions and the resulting feedback metrics would create friendly competition among friends on metrics for health and fitness accomplishments, capitalizing on the social appeal of video game scoring. At eighteen months, the company had released its first fully functional prototype: the Fitbit tracker, which took second place at the 2008 TechCrunch50 conference. Because of the publicity of Fitbit’s second place finish among a field of respectable competition, the young company received a surprising 2,000 preorders for the $99 clip-on device. With those pre-orders, a successful track record from previous ventures and that technology award, Fitbit had gained enough credibility to attract a variety of venture capitalists (Marshall, 2016). 

The first $2 million in venture capital came within two months of the TechCrunch50 publicity allowing the founders to quickly select a production location in Singapore and contract a manufacturer to build the devices. Their initial prototype, a simple pen sized pod which collected motion activity through a gyroscopic sensor like the one found in a Nintendo Wii controller, contained an integrated Bluetooth transmitter and onboard memory. Park was confident this simple design would prove easy enough to mass produce. However, the design and arrangement of the components did not translate well into mass production, causing several complete redesigns before Fitbit had a product that was compatible with an assembly line manufacturer.

Despite promises that the 2,000 preorders would be filled by December 2008, the deadline proved impossible to meet and the first Fitbit’s did not ship until September 2009, nearly two and a half years after the company’s formation and nine months behind schedule. In the remaining months of 2009, 5,000 additional units were sold. In the first year of distribution, reports of software accuracy problems surfaced, several exercise researchers found that Fitbits activity algorithms greatly overestimated the calorie burn rates, resulting in low levels of weight loss success among Fitbits earliest customers. (Koch, 2016).

Core Vertical Operations 

Fitbit’s original business model disrupted a market of more sophisticated fitness devices, such as heart rate monitors from Polar, Garmin and Magellan. The fitness market of 2007 was served by complex sports watch and chest strap combinations, together they measured exercise intensity and estimated the calories burned by monitoring the electronic signals of heart rate and broadcasting the readings to a sport watch for data storage, then were uploaded by a micro USB cord to a PC for processing and storage. The technology in those heart rate monitors was evolving in 2009 as the Fitbit finally arrived on store shelves, with competing fitness trackers offering more precise GPS features to record distances traveled during exercise. Those emerging sports watches combined the distance data along with a user’s height and weight data and the resulting heart rate to provide workout intensity information and more precise calorie burn estimates (Koch, 2016).

The disadvantages of the heart rate monitor technology of Fitbit’s competitors was that the device sensors required a wide elastic belt to be worn around the chest, which many users found awkward and uncomfortable and regardless of how well these transmitters fit, they often lost signal during exercises involving twisting motions (Kerner, 2017).  Fitbit’s one-piece solution simplified calorie burn estimates by utilizing pre-calculated burn rates based on physical motion, factoring in the wearer’s weight and age, which was surprisingly accurate at estimating calorie burn rates almost as precisely as the more sophisticated heart rate system. It is through this minimalistic hardware and multi-day battery life combined with sophisticated software that Fitbit chose to build their first vertical.

A third area of Fitbits design advantage was its freedom from GPS and cellular connections, the competitors in the heart rate and GPS systems were only marginally accurate at measuring distances, and in doing so they consumed considerable battery power; in addition, most the competing GPS watches required an overnight recharge for every three hours of activity monitoring. The amount of hardware and sophisticated technology in Fitbits competitors also added to the costs with a 2008 price range of between $300 and $800 per device. The combination of awkward chest straps, inconvenient recharging times and high price limited the market appeal of those original GPS fitness trackers to serious athletes and extremely health conscious consumers (Seitz, 2016).

Fitbit’s superior solution simplified fitness trackers, because the designers realized that heart rate and distance were not an absolute requirement to estimate calorie burn for casual exercises. Fitbit’s proprietary technology used a more energy efficient pedometer that detected motions generated by walking and combined that multi-sport motion sensing technology. The Fitbit software could decode the detected movements and estimate what type of exercise was being performed, and estimate the number of calories being used, the wristbands were capable of storing days’ worth of data to later be uploaded to their website for analysis and initial studies found that Fitbit’s projected calorie burn was nearly as accurate at calculating the calorie conversions made by more sophisticated hardware used by Garmin and Polar (Huang, 2016).

In comparison, Fitbit’s simplified wristband motion trackers could also easily be worn around the clock to provide a more comprehensive overview of total activity, including sleep data. The system’s energy efficiency allowed the wristbands to last up to five days between charges and the accompanying fast-chargers could recharge the Fitbit in less than an hour. The comfort and convenience of this revolutionary design combined with the simple technology allowed the devices to sell for a fraction of the price of existing fitness monitors. Fitbit’s original business model also planned for an additional revenue stream created by premium website services such as long-term data storage, charts and analysis for an annual subscription cost of $50, this plan would allow sustainable income after market saturation was eventually reached. All of these competitive advantages created a new vertical product in the health and fitness technology market and Fitbit was the first name that any consumer thought of if considering an inexpensive and simple calorie and exercise tracker (Koch, 2016).

Building substantial height to its core vertical, Fitbit pioneered a corporate wellness sales division, a move that has kept the company ahead of its competitors in the workplace wellness marketplace. These partnership’s competitive advantages have been sustained by Fitbit’s unique customization of user data to comply with the recently passed Health Insurance Patient Privacy Act-HIPPA (Seitz, 2015).

Unmet Market Need Aim & Missed Opportunities

Today, Fitbit continues to face tough competition from the Apple Watch and new fitness technology that offers precision level EKG quality heart rate hardware. Apple was quick to acquire the company who created this technology, with hopes of integrating it into a new market of heart conscious consumers. The future possibilities for the Apple Watch include sending 911 notifications if the user’s heartbeat stops or sending an alert to a user when one’s pulse indicates a warning of an oncoming heart attack. The technology could also prove valuable in solving crimes by alerting authorities the precise time and location of a murder or fatal accident. If Apple pioneers such lifesaving technology in an affordable package with a multitude of companion features, it would be safe to assume a dimmer forecast for Fitbit’s market niche (Feel the Beat of Heart Rate Training, 2017).

Competitive Advantage 

Fitbit’s key early advantage was being the first wearable fitness tracker to market. James Park seized the opportunity to address the unmet market need, developing the first few models that set the bar across the market and Fitbit soon became a household name. The simplicity of the initial out of the box setup and continuous wear and convenience made Fitbit the device of choice with consumers looking for daily encouragement to reach personal health and fitness goals.

With over 25 million current Fitbit active users, Fitbit’s community has become the largest activity tracking population. New consumers are also attracted to join the Fitbit community to chat and challenge brand-loyal friends. Maintaining an active online community has been essential for Fitbit’s most recent technical developments. The more people who track their fitness, find opportunities for improvement and provide feedback, the better the next generation product can be. However, it didn’t take long for tech industry giants to catch up and surpass a device, which was once only a pedometer, with their own patented technology (Entis, 2017).

Today, Fitbit’s greatest advantage is its affordable price. Consumers can purchase a new Fitbit for only $100 compared to the lowest grade of the Garmin watch, the Forerunner, which costs $105 and the original Apple Watch priced at $179. This advantage will continue to attract people interested in tracking their health who don’t want to break the bank on GPS satellite accuracy and smartphone compatibility. As Fitbit adds new features to its product set, as done with its newest model, the Ionic, the price gap is slowly closing and the entrance of $25 rivals from several Chinese manufacturers is squeezing the profits in the market (Lashinsky, 2016).

An additional threat to Fitbit’s future growth is the entry of conventional watch companies such as Timex and Casio offering less expensive $30 competitors in addition to luxury brands such as Tag Heuer, Seiko and Ferragamo that offer integrated activity tracking sensors into conventional jewelry timepieces. The entry of the conventional watchmakers eliminated one common complaint of prospective Fitbit buyers, since many users do not choose to wear a simple rubber wristband in place of or in addition to a conventional watch (Seitz, 2016).

Unique Products and Services that Create Barriers to Entry from Competitors 

Fitbit has been able to defend its position as a market leader through its design simplicity. No competitor has managed to offer novice fitness consumers a smoother transition to integrate a tracking device into their daily routines. The loyalty of Fitbit’s existing customers is reinforced by the storage of historical weight and fitness history through the supporting website and phone applications. If a current user switched brands, they would lose the integration of historical charts and graphs comparing current fitness progress to their own previous levels. Additionally, Fitbit has captured the first mover advantage in corporate wellness programs and has maintained that position through a well-developed Health Information Privacy Law department that protects its corporate clients from employee lawsuits. The base model Fitbit’s simplicity also provides competitive advantages in the corporate wellness market, since its lacks GPS and heart-rate capabilities which eases employee fears of health condition discrimination or inappropriate employee location tracking (Farr, 2016).

Home Office and Distribution

Headquartered in San Francisco, California, the company has expanded its distribution around the world after nearly a decade of development. In addition to North America, Fitbit has a presence in Latin America, Europe, the Middle East, Africa and Asia Pacific with offices in large cities including Boston, Dublin, Hong Kong, Shanghai, Seoul, Tokyo, New Delhi and Singapore.

But how does Fitbit expand markets and sell their products in other regions? Take China as an example. Fitbit formally entered the Chinese market in June 2014, following its sales footprint in 42 countries around the world. But why did Fitbit choose to enter the Chinese market in 2014? Fitbit studied the research reports on the health status of Chinese consumers.

In fact, the future health of the Chinese people deserved attention. China’s overweight population has risen from 25% in 2002 to 38% in 2012 and this number reached 50% by 2015. In terms of body fat index, on average, Chinese are not as overweight as Westerners, but the incidence of diabetes in Chinese people is as high as 11%, similar to that of the United States. Furthermore, people categorized as obese now accounts for 11% of the total population. Fitbit can help Chinese consumers become healthier, because it has a lot of measurement functions, such as the number of steps walked, steps climbed, heart rate, quality of sleep, and other personal needs involved in fitness. Fitbit’s products function for sports, diet, sleep and weight management and include peripheral systems to help people build healthier lives (Koch, 2016).

In terms of sales channels, Fitbit understands that online sales in China are very important. Following Best Buy, which uses Jing Dong is its online distributor, Fitbit products have started distribution with Jing Dong.

In addition, Fitbit’s products are now manufactured in Shenzhen, China, an area that is quickly becoming the technology manufacturing region of the 21st century (Entis, 2017). Fitbit also opened a flagship store in Tian Mall. Additionally, conventional distribution channels such as Amazon, sporting goods stores and most large department store chains all carry Fitbit products. The primary mission of the Chinese team is to broaden Fitbit’s brand awareness so that everyone knows what Fitbit is, how it helps people live a healthier and happier life.

Diversity 

Unlike the wide array of applications, functionality and color provided by their wearable trackers, Fitbit is guilty of lacking diversity in the workplace. Like many tech software companies, Fitbit perpetuated a serious gender imbalance in favor of men. The firm took memorable heat from the press in 2015, as their all male Board of Directors generated attention. Even though women dominate the wearable activity tracker consumer base, Fitbit didn’t see it necessary to include females on their board or in leadership positions. The media isn’t the only source reporting misrepresentation. There is a clear consensus among employee reviews on job sites like Glassdoor and Indeed that expose the company as “extremely white-washed” with very little opportunity for growth for minorities that manage to make it in the door. Unfortunately, lack of gender and cultural representation is an all too popular trend in STEM industries and tech software companies in particular.

Recently, Fitbit has made notable strides to diversify its workforce. Two women have succeeded retired board members, while two more have moved up into Vice President roles. As for the inclusion of minorities, Fitbit has yet to demonstrate progress toward their promise to attain an ethnically proportionate workforce. We are hopeful that the firm’s welcome to fair hiring is genuine and Fitbit can create a more inclusive company and culture.

Sustainability 

Today’s most successful new companies clearly published policies and strategies to achieve the Triple Bottom Line results. Like their stances on diversity and global responsibility, Fitbit’s formal policies on sustainable business practices are also non-existent. We can conceive the attention extended to healthcare and fitness, but what about the well-being of the environment? From what we can gather on Fitbit’s consumer output, their products are relatively easy to recycle. Once users decide to give up a wearable tracker or upgrade to the newest version, they can either sell or donate the device. But soon, these old technologies will become obsolete. Their capabilities will prove to be outdated and inaccurate, rendering the whole device useless. In the case that the bracelets are not in reusable condition, there is no solution to keep them from piling up in landfills.

This is where a true opportunity lies for Fitbit. Like the Apple take back system, Fitbit can receive old devices at their end of their life to disassemble into separate, reusable parts. Though this prove an initial cost for Fitbit, they can deliver a new sustainability platform to their consumers and save on usable electronic parts in the long-term. 

Competitor

  • Apple Watch

Fitbit Ionic vs Apple Watch Series 3: Design

There’s no doubt that the Fitbit Ionic lacks a conventional aesthetic appeal; however, it won’t burn your eyes off. Recently Fitbit has been focusing on integrating style into their designs. The Ionic contrastes the Blaze’s angular look, and while we found it grew on us during testing, it’s sure to put a lot of people off.

On the other hand, the Ionic is impressive in how it crams a whole bunch of technology into a slim, lightweight case. You’ve got GPS, NFC, enough battery for four days of life and multiple sensors in a 50m waterproof square. Like the Blaze, there are three buttons on display here. You can use the display to touch your way around Fitbit OS, but if your hands are wet or if you’re in the water you may have an easier way around with some tactility.

With excellent clarity in both low light and glaring sunshine. You’ll get the Ionic in three flavors: a silver watch case with a blue/grey band, a graphite grey case with a charcoal band and a “blue orange” case with a slate blue band. But in case you’re not down with stock bands, you’ll also be able to purchase some nice accessories. There are two-toned breathable sport bands for purchase in three colorways as well as handcrafted Horween leather bands in midnight blue and cognac.

However, Apple watch keeps a design that’s nearly three years old, but the watch is easier on the eyes. Take apple watch series 3 as an example, it stills provide several models to users to choose. There are two different case sizes (38mm and 42mm), three different materials (aluminum, stainless steel and ceramic) and a whole lot of different colors. With the Series 3, you can get the LTE in the whole range, but non-LTE only comes in aluminum. There are also endless band options, from the low-end nylon and sport bands to high-end Milanese Loops and leather bands.

The major differentiator between these two is in the build. If you’re looking for something to complement every outfit in your wardrobe, and you have no problem with collecting an army of bands, the Apple Watch wins. Apple watch offers very limited styles for users to select, if people who want to have different styles smartwatch, Fitbit absolutely a better choice.

Fitbit Ionic vs Apple Watch Series 2: Battery

For as long as the Apple Watch has been around, it’s gotten about a day of battery life. Sometimes it’ll do less, but most of the time you get about a day – a day and a half to two days if you make deliberate efforts to avoid high consumption apps. With a mixture of both LTE and non-LTE features in the Series 3, you should still get around that, but using the call feature will cut it dramatically. In fact, Apple quotes only an hour of continuous talk time on the Watch.

The Ionic, Fitbit, will net people up to five days of battery life, or up to 10 hours when using GPS or playing music. That’s decent from such a slim device with as much power and many features as it has. If you have to make your decision based on battery life, the Fitbit is the clear winner here. Those extra days mean it’s much more viable as a sleep tracker too.

Fitbit Ionic vs Apple Watch Series 3: Price

The Apple Watch Series 3 has a wide range of prices, starting as low as $329 without LTE, $399 with the cellular connection, and then climbing up further depending on your choice of materials. It really depends on what you’re looking for, and how chic you’re willing to go. Bands will cost you at least $50, but again climb up into the hundreds. The Ionic, on the other hand, goes on sale for $299.99 on 1 October. You’ll also be able to purchase some bands for $29.99 to $59.99. Thus, Fitbit could easier to get access into market.

Fitbit Ionic vs Apple Watch Series 3: Fitness

There is usual standard of Fitbit fitness features, like Smart Track, VO2 Max and Sleep Stages. The Apple Watch, on the other hand, doesn’t officially recognize as many workout modes as the Ionic. For instance, it doesn’t have a mode for weights or interval training. The Apple Watch also doesn’t automatically track your workouts like the Fitbit does for running, heart beat tracking.

The Ionic is only the second Fitbit to utilize GPS, after the Surge, allowing it to match the Apple Watch in this regard. In our test we found the data of GPS to be pretty on the money, and it didn’t take too long to actually lock on either.

Finally, Fitbit is debuting Fitbit Coach on the Ionic. It’s basically a new version of Fit star, giving users a curriculum of workouts, the company says will tailor to your personal needs the more you use it. With watch IOS 4, the Apple Watch does some light personalized coaching, but it’s mostly on how to close your rings, giving Fitbit the nod here.

Fitbit Ionic vs Apple Watch Series 3: Smart features

Speaking of ecosystems, the Ionic is Fitbit’s best go yet at creating one. There’s an app store here, which Fitbit refers to as a ‘Gallery’. It debuted with just apps from Pandora, Starbucks, Strava and Accu Weather, but that has grown, adding apps from the likes of The New York Times, Nest and more. Apple has had a head start in getting developers in tow, and it’ll take a bit for Fitbit to catch up.

There’s 2.5GB of space for you to either store offline music from Pandora or from your own library. However, since the Ionic doesn’t have cellular capabilities, people can hardly stream music without your phone around.

Fitbit Pay is that company’s foray into payments, thanks to its purchase of Coin. You can take your American Express, Visa or MasterCard and link it up to Fitbit Pay, as well as debit cards from “top issuing banks”. You can link up to six payment cards to Fitbit Pay, while you have a limit of eight on Apple Pay.

While the Ionic plays some good catch up in the realm of music and NFC payments, the maturation of Apple’s ecosystem gives it a bit of a nudge here. However, as Fitbit gets more time to get major apps up and running, Apple may have a serious competitor to worry about, LTE or not, especially as more Pebble developers join Fitbit’s budding platform.

Fitbit vs Garmin

Both have their obvious strengths, but how do their wearable platforms match up? We’ve broken it down to hardware, features, apps, fitness and sports tracking to see whether it’s Garmin or Fitbit that comes out on top.

 

Garmin vs Fitbit The Hardware

Fitbit has actually been creeping into the world of smartwatches for a while now, with its Fitbit Blaze and Fitbit Surge acting as introductory “fitness watches”, but that doesn’t change that Fitbit got where it is today because of its fitness trackers like the Charge, Alta and Flex.

While the fitness trackers are the spine of Fitbit, its flagship is the Ionic. It’s a big riposte to the Apple Watch, with an app store that’s still growing, contactless payments and more. It’s the most fully featured Fitbit yet, as it pools together smartwatch-like features with both 5ATM water resistance and built-in GPS – features that previously were limited to select Fitbit lines. It’s also built for the future, intended to eventually have features like sleep apnea and atrial fibrillation detection.

As for Garmin, well, things are a little more complicated, such is the depth on offer. In terms of fitness trackers, the headliner is currently the Garmin Vivosport – its latest attempt to compete with Fitbit. While it’s got GPS, heart rate monitoring and VO2 Max, it’s also got a bit of a small and overly sensitive display. It also offers more basic options like the Vivofit 4 that focuses solely on those standard fitness tracking features. So steps, calories, distance and standing hours.

It’s the little things that separate these two. For example, Fitbit will generally provide users with more stylish wearables and much more customization, while Garmin’s devices tends to lean towards a masculine look. To offset this, of course, you’re given a host of physical options to choose from.

Garmin vs Fitbit: Sports Tracking

Not only can you track the likes of running, trail running, hiking, cycling, swimming, skiing, rowing, triathlon training and more, but you can also do this with the in-built GPS or Garmin’s UltraTrac, which conserves battery to keep tabs on your activity over longer distances. Heart rate is also a mainstay within the higher end of Garmin’s range, giving you ample insights into heart rate zones and heart rate variance.

Garmin vs Fitbit: Price

As always, price is something you have to consider, too. While the notable members of Fitbit’s range begin at $99.95 and max out at the $299.95 mark, that barely makes a dent in Garmin’s family. While there’s the $299.99 Vivoactive 3, if you want the latest from the Fenix or Forerunner series, your wallet will be roughly $500 lighter, and that’s a big financial commitment to consider alongside the ecosystem and general features on offer.

Garmin vs Fitbit: The Apps

Take Fitbit, which, while maybe not providing the most detailed after workout metrics in the business, still manages to offer one of the more rounded fitness platforms. This is particularly the case for beginners, who are able to dive into trends, dedicated workouts, sleep tracking and social aspects, such as linking with friends and challenges.

With the Ionic, Fitbit has also launched an app store. It was rough going at first, with only a couple of apps, but the store has gradually grown over the past couple of months, with the likes of The New York Times, Philips Hue, Yelp and more joining the fray.

As for Garmin, you’ll be dealing with Connect, the home of your activity, and ConnectIQ, the store for you to pick up apps and new watch faces. As with Fitbit, we have a comprehensive look on how to run better with Garmin Connect and a Garmin Connect IQ app store guide, but we’ll skim through the highlights here.

The companion app, which is compatible with all Garmin devices and available on desktop, offers you a place to plan, track and review your workouts. So, whether you’re preparing for a marathon and setting monthly goals or simply looking to beat other runners’ best times in local areas, the platform has you covered.

When compared to its Fitbit counterpart, more serious exercisers will find little comparison – Garmin gives you an incredibly detailed look at your activity once you dive past its handy Snapshots, while also allowing you to upload data to the likes of Strava and understand elements like heart rate zones. Even better, Garmin has recently updated ConnectIQ to be more convenient to use for beginners, with an easy-to-digest home screen filled with your stats and metrics.

 

Geographic area

Headquartered in San Francisco, California, the company has expanded its distribution around the world after nearly a decade of development. In addition to North America, Fitbit has a presence in Latin America, Europe, the Middle East, Africa and Asia Pacific with offices in large cities including Boston, Dublin, Hong Kong, Shanghai, Seoul, Tokyo, New Delhi and Singapore.

But how does Fitbit expand markets and sell their products in other regions? Take China as an example. Fitbit formally entered the Chinese market in June 2014, following its sales footprint in 42 countries around the world. But why did Fitbit choose to enter the Chinese market in 2014? Fitbit studied the research reports on the health status of Chinese consumers. In fact, the future health of the Chinese people deserved attention.

 

China’s overweight population has risen from 25% in 2002 to 38% in 2012 and this number reached 50% by 2015. In terms of body fat index, on average, Chinese are not as overweight as Westerners, but the incidence of diabetes in Chinese people is as high as 11%, similar to that of the United States. Furthermore, people categorized as obese now accounts for 11% of the total population. Fitbit can help Chinese consumers become healthier, because it has a lot of measurement functions, such as the number of steps walked, steps climbed, heart rate, quality of sleep, and other personal needs involved in fitness. Fitbit’s products function for sports, diet, sleep and weight management and include peripheral systems to help people build healthier lives (Koch, 2016).

In terms of sales channels, Fitbit understands that online sales in China are very important. Following Best Buy, which uses Jing Dong is its online distributor, Fitbit products have started distribution with Jing Dong. In addition, Fitbit’s products are now manufactured in Shenzhen, China, an area that is quickly becoming the technology manufacturing region of the 21st century (Entis, 2017). Fitbit also opened a flagship store in Tian Mall. Additionally, conventional distribution channels such as Amazon, sporting goods stores and most large department store chains all carry Fitbit products. The primary mission of the Chinese team is to broaden Fitbit’s brand awareness so that everyone knows what Fitbit is, how it helps people live a healthier and happier life.

Factors that Contribute to Innovation 

Fitbit’s products pioneered cross-brand compatibility with devices that seamlessly interface with nearly all brands of smartphones and tablets on the market, a key advantage which contributed to their early revenue growth. Today, many smart wristbands and watch products remain limited to either the Android or Apple systems, an obstacle which alienates those consumers who have both types of devices in their household, and while there are also many products that are compatible with both  the iOS  and Android operating systems, most fitness systems continue to ignore the Windows system users. Fitbit in comparison, has managed to build long-term loyalty by creating products that  can be simultaneously operated on IOS, Android and Windows systems, so that their consumers can be assured that the Fitbit app will always be compatible with their future choices in smartphones. The founders philosophy can is evident by their open source access to fitbit servers to allow third party developers to create unique interfaces to the users data files because as founder James Park stated “In an open market, we can better cooperate with local partners. After all, they know more about the local market than we do.” (McNew, 2015).

In addition to their hardware interface versatility, Fitbit’s strategy is aimed at encouraging an open software platform, because Fitbit believes that more innovative ideas can be better exploited through openness and absorption. According to a developer, Fitbits platform has a port opening of the application works in both directions, Fitbit users cannot only send their data through Fitbit to a third-party application. If a user thinks a third-party app is great, they can also send data from a third-party app to Fitbit. For example, a male consumer is very concerned about his diet. He found a great application for eating and drinking, and he was able to import third-party applications into Fitbit via its interface. He can see and record calories on the Fitbit and so on (Schwahn, 2017).

In addition, Technology is a key factor of Fitbit innovation. Since 2009, it has released 15 different products, each of which is an update to the previous one. For example, Fitbit One, released on September 17, 2012, is an updated version of Fitbit Ultra with a more vivid digital display. It has independent clips and separate charging lines and wireless synchronization. Fitbit One is the first wireless activity tracker to synchronize with Bluetooth 4.0 or Bluetooth smart. Wireless synchronization is currently available on iOS and Android devices. Fitbit One can record several daily activities, including but not limited to the number of steps, distance, floors climbed, calories burned, active minutes and sleep efficiency (Jary, 2018).

Competitors in the same field are also important aspect of Fitbit’s innovation processes. Apple, for example, released the Apple watch series 2 in September 2016. The Apple Watch series 2 has better waterproof features, can be worn when swimming or surfing, and can support up to 50 meters of water pressure. Fitbit also took immediate steps. Fitbit Flex 2 was released on 2017, replacing the original Flex, the lowest end of the Fitbit wristband line. This is the first model that was waterproof with swimming tracking. The tracker can be worn on the wrist, pendant or carried in a pocket. When receiving a phone call or text message it provides alerts movement alarm and vibration functions (Jary, 2018).

Entrepreneurial Improvements 

To stay competitive in the wearable tracker market, Fitbit needs to aggressively invest in hardware research in addition to integrating additional richness to their software platform in order to maintain consumer loyalty. Low price is no longer a guaranteed winning strategy in the fitness market, with the differences between style and performance rapidly shrinking, Fitbit needs to enter another business vertical that sets its products apart. We recommend a steady progression into a closely neighboring market of medical devices. We propose Fitbit aim to align with various medical associations to discover best healthcare practices and create apps for physical treatments fighting illness and disease. If the highly accurate heart rate monitor can identify specific exercises performed by the readings of active heart rates, why can’t it detect palpitations and arrhythmias?

Along with alerts to potential health irregularities, Fitbit should develop software to allow consumers to easily share their tracked data with their healthcare professional. Organizing this data to be analyzed by physicians can open a dialogue with patients to work toward their goals in a safe, customizable fashion. Breaking into healthcare software opens the door to high potential revenue growth, if Fitbit is the first to curb this market.

 Unmet Markets and Missed Opportunities 

In 2014, just four years after Fitbit’s initial distribution, advancements were made in optical heart rate monitoring technology, now Garmin and Polar are producing similar activity trackers at a similar price points. While emerging technology would soon drive additional demand for wristband fitness trackers that increases the size of the pie, it will also breed new competitors who were better positioned to capitalize on consumers with special concerns for heart health along with athletes desiring deeper training feedback metrics.

These advancements in heart rate monitoring technology allowed those serious athletes and health-conscious consumers to abandon their chest strap transmitters for a single unit, rechargeable wrist monitor that integrated real-time pulse-rates along with 24-hour wear ability (Cook, 2017). As a result, Fitbit’s previous competitive advantage of one-piece simplicity was disrupted. To compound Fitbit’s new competing technology, they failed to license the technology in time to be the first to market with the new optical heart rate and activity wearables. Instead, a new competitor, Epson, led the optical heart rate integrated monitors a full year prior.

Fitbit’s first entry in the new market, the Charge HR, missed its planned holiday 2014 release date, instead arriving late to market with an underwhelming level of fanfare in January 2015 (Seitz, 2016). The Charge HR was quickly overshadowed by an improved Apple Watch only three months later. As with many Apple products, the features of their new watch were widely publicized through a big budget marketing campaign, which was the first to educate mainstream consumers on the benefits of wrist worn heart rate monitors. However, Fitbit did outmaneuver one of its main competitors, Polar, which lagged a year behind Fitbit in its release of a pulse monitoring wristband (Lashinsky, 2016).

Today, Fitbit continues to face tough competition from the Apple Watch and new fitness technology that offers precision level EKG quality heart rate hardware. Apple was quick to acquire the company who created this technology, with hopes of integrating it into a new market of heart conscious consumers. The future possibilities for the Apple Watch include sending 911 notifications if the user’s heartbeat stops or sending an alert to a user when one’s pulse indicates a warning of an oncoming heart attack. The technology could also prove valuable in solving crimes by alerting authorities the precise time and location of a murder or fatal accident. If Apple pioneers such lifesaving technology in an affordable package with a multitude of companion features, it would be safe to assume a dimmer forecast for Fitbit’s market niche (Feel the Beat of Heart Rate Training, 2017).

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