Despite slower than expected sales last year, smartwatch sales will grow at a healthy rate and will have the highest revenue potential of all wearables through 2019, according to Gartner.
The market research firm expects global smartwatch sales to reach $11.5 billion in 2016, then jump to $17.5 billion in 2019.
Gartner said about 30 million smartwatches were sold globally in 2015, and that number is expected to reach 50 million in 2016, then nearly 67 million in 2017. Skipping to 2019, Gartner projects 79 million smartwatches will be sold. Gartner’s 2015 number of 30 million smartwatches sold was down from a forecast of 40 million it made last October.
A big factor in attaining that growth will be how well Apple succeeds in popularizing wearables, including the Apple Watch, as a lifestyle trend, according to Gartner analyst Angela McIntyre.
"Apple is one of the few companies that offers a crossover between style and technology, and with the Apple Watch, consumers trust Apple to set the trends," McIntyre said in an interview.
Apple was the most successful smartwatch maker in 2015, despite not entering the market until April — months later than expected. As a result, its smartwatch sales were below expectations, although overall smartwatch sales by other vendors didn't meet expectations.
IDC said Apple shipped about 13 million smartwatches in 2015, well below the 21 million the research firm projected earlier in 2015. Gartner wouldn't comment on sales by specific smartwatch makers, including Apple.
The next-generation Apple Watch 2, expected to be announced as early as March with shipments in April, is considered the product to watch to help rev up the market.
What must happen in 2016 and beyond is that smartwatch makers -- including traditional watch makers like Casio, which are now entering the smartwatch market -- need to catch the interest of mainstream buyers, or at least "early mainstream" buyers, McIntyre said. That group would expand beyond the early adopters who have already warmed to the smartwatch trend.
Many smartwatch makers are eager to find ways to entice more women to buy smartwatches. Gartner surveyed 4,000 U.S. consumers last year and found that 8% had a smartwatch; 5% of women owned one while 11% of men did.
"Before the Apple Watch, most smartwatch designs were big and masculine-looking and still tend to be that way," McIntyre said. While there is clearly a trend toward smartwatch designs that "shrink it and pink it" to lure more women buyers, women's styles for smartwatches tend to remain larger, at least in the U.S., she added.
"Part of the problem with making the device smaller is having reasonable battery life," McIntyre noted. "For women, it has to complement their personal style and wardrobe, and that may mean more than one device. All the [technology complexities] of smartwatches that fascinate men may not seem as necessary to women as they think about how they would use the watch most of the day."
While a number of design experts are hoping the Apple Watch 2 will come in a round design, like the Moto 360 and others, McIntyre said, "I can't say that round matters; you can still be successful with a rectangular shape," she said.
The biggest successes in popular smartwatch designs may come from traditional watch makers, McIntyre said. These watch makers, such as Tag Heuer, Fossil and Casio are entering the market. "I'm looking forward to the sleek and elegant and sporty designs that only traditional watch makers know how to perfect," she said.
Of the 1.2 billion traditional watches sold every year, nearly one-fourth are digital watches, but not smartwatches. "It seems the logical next step for those digital watches is to connect them to a phone with Bluetooth," McIntyre said.
Or maybe smartwatches will become more independent of smartphones. That's a scenario wireless carriers are expecting with new billing plans to extend a user's primary phone number for a smartphone to a wearable like a smartwatch that operates over cellular.
McIntyre expects to see more smartwatches operate over Wi-Fi and to connect users to data in the cloud. She also expects to see more watches that are capable of making payments, relying on NFC technology.
Is there an enterprise market for smartwatches?
Enterprises are thinking about how their employees who own a smartwatch can use them for work, McIntyre said. "It's more about using your own smartwatch for business purposes than an enterprise deploying smartwatches," she said.
Vendors such as Salesforce.com have introduced apps that provide work productivity functions on a smartwatch, eliminating the need to do the same things on a smartphone. While that market is in its early days, "those products are getting interest in the market," she said.
At CES in January, Samsung said it was working with Red Hat to provide application modules for smartwatches that provide workflow and time and expense management. In one pilot project, Apple Watches are being used by ground managers at an airport in Quebec City, Quebec, to receive flight updates and gate changes delivered to their wrists, which is considered quicker than using a tablet.
In general, McIntyre agreed with other analysts that the market for smartwatches hasn't reached expectations, but she is optimistic that it will grow at healthy rates in coming years. One reason is that some buyers may have held back on buying first-generation smartwatches and are waiting for tech innovations to be tested and for designs and styles to evolve in upcoming second- and third-generation devices.
"It's taking a bit longer for the smartwatch market to be adopted, but if you are looking at consumer adoption or enterprise adoption, it's a question of how fast those markets will go up," she said.