Daybreak - Why the clock is ticking for Indian smartwatch makers

Episode Date: December 9, 2024

It really isn’t a great time to be a smartwatch brand in India. Pun intended. You see, the market for smartwatches in India has gone from seeing dizzying highs to depressing lows, all within the span of one year. Just last year in September, at least 17 million people had placed orders for smartwatches across the country. Everyone seemed to want to get their hands on one. And the two brands that were largely credited for this new craze were Boat and Noise. But now, a little over a year later, all those people who were frantically buying smartwatches last year aren’t buying them anymore. What’s more is that the likes of Boat and Noise – brands that had dominated the market thus far and set all sorts of new records – are now losing their sheen. They have very steadily been losing market share to a handful of new entrants. What changed? Tune in. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.Listen to the latest episode of Two by Two here

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It really isn't a great time to be a smartwatch brand in India, pun intended. You see, the market for smartwatches in India has gone from seeing dizzying highs to depressing lows, all within the span of one year. Allow me to elaborate. Just last year on September, at least 17. million people had placed orders for smartwatches across the country. Everyone seemed to want to get their hands on one.

And the two brands that were largely credited for this new craze were boat and noise. Cut to now, a little over a year later. All those people who were frantically buying smartwatches last year aren't buying them anymore. What's more is that the likes of boat and noise, brands that had dominated the market thus far and set all sorts of new records are now starting to lose their sheen a little bit.

They have very steadily been losing market share to a handful of new entrants. Like, for instance, the nine-year-old bootstrap company, Firebolt. Their claim to fame is their super cheap prices. Firebolt, for instance, launched products at about 1,000 to 1,100 rupees. So most smartwatch buyers in India aren't looking to spend a lot of money on a smart watch because they look at it more as a fashion or lifestyle accessory.

The customers who are looking for something for health or wellness use cases are willing to invest more into devices that have better sensors, better quality hardware. So that's why smartwatch is in the under-3,000-repeas price bracket account for around two-thirds of the market. That was my colleague, the Ken reporter, Gaurif Bagu. He said that while that's great,

For consumers, from a brand's perspective, this isn't the greatest place to be. Because it usually results in a price war. And we all know how that goes. It's almost always a race to the bottom. In this case, too, brands like Boat and Noyes were compelled to slash their prices to keep up. But that ended up having major repercussions for both these brands. Boat has already reported a loss of 54 crore rupees in FI-24, its revenue has slipped 8% from the previous year.

Meanwhile, noise has reported a loss of about 20 crore rupees at FI-24. While in both's case, smartwatches only contribute about a quarter to the company's top line, that isn't quite the case with noise. Smartwatches are its core business. Having said that, neither of the two brands can afford to be dethroned. So now both brands are determined to pull themselves out of this slump. Both these brands are completely rethinking their strategy.

From offering higher priced watches, to launching ones that can track your menstrual cycle, and even limiting yearly launches. These brands have been going all out. But is it even worth it? Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahal Philippos, and I'll be joining my colleagues Nikda Sharma every day of the week to bring you one business story that is worth understanding and worth your time.

Today is Tuesday, the 10th of December. The biggest problem with the smartwatch market is that it has barely evolved in the last few years. About three to four years ago, most of the smart watches that we could buy here in India were white-label products shipped from China. Meaning, they were generic watches with pretty much the same feature, similar designs. A brand just had to come in, slap its label on it and call it a date. Four executives from top wearable brands here in India told Gordov that things are hardly any different now. Most smartwatch makers are just partnering up with electronic manufacturers like Dixon technologies to assemble these devices in India.

All of the components are usually shipped from abroad. Basically, the entry barrier to enter the smartwatch space was always low. In fact, that's exactly what ended up causing an absolute bloodbath for big brands in the affordable smartwatch space. Brands like Firebolt were able to come in and blow up almost overnight, while big established brands like noise and boat watched from the sidelines. The consumer profile that these brands were targeting was another factor that really contributed to their downfall in this particular category. And by consumer profile, I mean the kind of smartwatch users they were trying to appeal to.

An industry executive Gorov spoke to said that typically there are three kinds of users. The first would be sports and fitness enthusiasts looking for a tool to track activities. Then you have people using smartwatches for medical purposes. And finally, the average consumer who merely sees the device as a fashion accessory. Any guesses which user these affordable smartwatch brands largely cater to? Well, if you guessed category three, then you are correct. You see the first two use cases, people looking to track their fitness or medical conditions, require investing in all sorts of hardware and software.

Generally, people looking for smartwatches in this category are looking for high-end models from the likes of Garmin, Apple or Samsung. They usually cost over $25,000. So that leaves the third category of consumers. Smartwatch brands catering to this category aren't focusing on improving the product or tweaking the software. They are focused on marketing the product as a lifestyle accessory. So let's go back to that Firebolt example.

While it is largely positioned towards the lower price brackets, it's roped in celebrity brand ambassadors, people like MS Dhani, Virad Koli, Vijay Devakonda, Vicky Koshal and Kiyara Advani, all of this to gain consumer attention. A store owner, Gorev spoke to, said generally, a customer that walks into an electronic store looking for a smart watch of this kind

will ask about the design of the smart watch. Does it have a square face or a round face? Does it have a nice strap? they won't really be asking questions about the operating system or features that it offers. But those are first-time buyers. Today, Indian consumers are more attuned to smartwatches. They're looking for a better product experience. Just aesthetic factors like a nice strap or a nice color won't cut it anymore.

So these brands are now realizing that playing a low-price high-value game just isn't sustainable. They are now adapting their strategies. More on that in the next segment. Most brands in the smart watch space are now back to the drawing board. After years of going all out with marketing, they are now trying to actually improve the product. They're putting more thought in. For example, noise switched from stainless steel to ceramic for its watch bodies.

They've also completely overhauled the user interface. So the speed and responsiveness has improved. significantly. Noise's strategy now is focusing on quality rather than quantity. So it's reducing the number of budget smartwatch launches and instead it's going all out with research and development. In fact, most of the top players in this space, noise, boat, firebolt and bolt are going in this direction. They are limiting the number of releases as well as the volume of inventory they are accumulating. Instead, they are finally investing in approving the all-round user experience. The goal is to differentiate the value proposition. That means not just a revamp of the user interface, but also improving the accuracy of its hardware. So better chipsets, more accurate sensors, higher-quality screens, the works.

The next step, as per experts, is coming up with whole new use cases. Take for instance Noises Diva 2 smartwatch. It was launched in October. The device is targeted at women and offers health insights like tracking menstrual cycles. It's also priced at about 4,500 rupees, which most agree is a far more sustainable price point. All of this points at a clear trend of course correction.

The margins, of course, are not huge, but at scale, the absolute numbers could make up for it. The flip side to this that many people will very quickly point out is that it may be too little too late. Sure, the likes of boat and noise are investing in R&D, but they still don't have any proprietary tech, unlike Google or Apple, which have IPs, patents, and full-blown in-house R&D divisions.

So it's going to take a while before their investments actually start bearing fruit. There's also another entrant in the space that they all have to watch out for. I'm talking about Tata-owned Titan. You see, in the past one or two years, the company has pulled off several successful smartwatch launches in the $1,500 to $3,000 range, especially under its fast-track sub-brand. And so far, things have been looking good. The 40-year-old watchmaker has seen a 56% growth in its smart watch business for FY24, is managed to claim a comfortable third position by market share in the later September quarter, and this largely has to do with its strong offline presence. Smartwatch incumbents aren't feeling too optimistic in the middle of all of this, which is why Boat has taken a more defensive position.

It's actually reducing the volume of its variables and deprioritizing launches. Instead, it's decided to focus more on its much bigger audio business. It now seems to be focused on clearing out its inventory. Its sales too aren't anywhere as hot as they were before. In fact, it's down 35% in the latest September quarter compared to the same period last year. Other brands are exploring new growth avenues as well. Noise is now focusing more on audio, Bolt is getting into home audio and car dash cams,

noise is also going all out with marketing activities and gifting. All of this seems to be pointing at one thing. Maybe the time for affordable smartwatches has come and gone. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only. offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website.

Today's episode was hosted by Rahil Filippos, produced by me Snigda Sharma and edited by Rajiv Sien.