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- Android passed 80% of EMEA smart phone shipments in 2015. (Source: CANALSYS)
- Apple hit low end of revenue guidance as iPhone units fell 16%. http://tinyurl.com/jb8ycnj
- RISING SUPERSTAR: 24 consecutive quarters of net revenue growth above 20% for Under Armour … not bad
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- Skechers GOrun 4 2016 Runner’s World ‘Editor’s Choice’ award. I have a pair of sketchers and like them. They feel super light. Obviously, the Ed. took that into account 🙂
- Bucking that trend, unfortunately, is Shimano whose bike net sales for the first quarter of fiscal year 2016 decreased 20.3% year on year to ¥65.3 billion. some technical currency issues and slowdown in the Far East amongst other factors.
- and finally some considered thoughts from fool.com on Fitbit in the corporate Wellness sector
At first glance, Fitbit (NYSE:FIT) may seem like a standard consumer electronics company, albeit one which places an emphasis on wellness. Yet the wearable giant’s fitness trackers are enjoying rising demand from a seemingly unlikely source: enterprise customers.
In 2015, Fitbit added over 1,000 new enterprise customers. Although this remains a modest driver of Fitbit’s business overall, it represents a tremendous opportunity for the firm. With competition in the fitness wearables market intensifying, establishing a foothold with corporate buyers could reward shareholders in the long-run.
Less than 10% of revenue
Fitbit counts several Fortune 500 firms as its customers, including Wendy’s and Marathon Petroleum. Collectively, its corporate customers have purchased hundreds of thousands of Fitbit’s fitness trackers, which they dole out to their employees as a way to boost morale and reduce healthcare costs. Last fall, Target announced that it would purchase as many as 335,000 trackers for its employees, perhaps the most ambitious use of Fitbit’s products to date. Enterprise customers use Fitbit’s trackers in much the same way as traditional consumers but Fitbit also provides software, designed to facilitate company-wide competitions, which allows firms to view their employees’ data.
Unfortunately, Fitbit doesn’t break out its corporate revenue on a regular basis. During Fitbit’s most recent earnings call, CEO James Park revealed that corporate customers accounted for less than 10% of the company’s sales. Most of that comes from its actual trackers. In its 10-K, Fitbit noted that “revenue from the corporate wellness software and services was less than 1% of revenue.”
Still, Park is optimistic about this aspect of Fitbit’s business. He provided more color during the company’s February earnings call.
…it’s a very important part of our business. To that effect, we are adding significantly to the headcount for that group, both in sales and marketing and in engineering as well…In terms of more detailed metrics, I think what we could say is that there is an annual selling cycle, but overall the volume of sales is really reflective of the amount of investment we’re going to make both in engineering and headcount and in sales and marketing.
Better margins, less competition
Fitbit’s corporate wellness business has two particularly attractive aspects: margins are better, and the company faces fewer competitors. Fitbit CFO Bill Zerella emphasized both factors during the February earnings call.
…typically, most companies will not work with multiple device providers. They’ll select one company to work with…I’m not sure if [our corporate customers are] technically, from a contractual standpoint, exclusive, but I believe that virtually all of the corporate wellness customers that we work with just work with and distribute Fitbit devices. The pricing in the corporate wellness side is actually more attractive than the rest of our business. The discount levels are different since we’re selling direct to enterprises, so it’s actually a more attractive margin profile than the rest of our revenue.
When Fitbit wins a corporation over, it captures tens of thousands of device sales in one fell swoop. And it doesn’t have to compete as fiercely on a direct consumer-by-consumer basis, reducing the need to be as aggressive with discounting or promotions.
Expensive smartwatches could have a difficult time competing
Its corporate business also appears less likely to fall prey to a smartwatch-fueled decline.
According to research firm IDC, Fitbit was the largest seller of wearable devices in the fourth quarter last year, shipping 8.1 million units. Apple (NASDAQ:AAPL) came in second place, as it shipped 4.1 million Apple Watches in the fourth quarter of 2015.
Persistent fears of a coming smartwatch revolution have haunted Fitbit throughout its relatively short history as a publicly-traded company. Apple has repeatedly emphasized the fitness capabilities of the Apple Watch in its marketing, as the company’s smartwatch is capable of tracking its user’s heart rate and activity level. The Apple Watch lacks the multi-day battery life and advanced workout tips offered by some of Fitbit’s trackers, but it’s generally been viewed as Fitbit’s most fearsome rival, particularly in the long-run. It’s a safe bet to assume that, over time, Apple will roll out second- and third-generation models with more advanced fitness features.
Eventually, Apple could take a significant chunk of Fitbit’s consumer market, but it’s hard to imagine the Cupertino tech giant capturing Fitbit’s enterprise segment. In time, the Apple Watch may offer some useful enterprise features and win some corporate buyers of its own. But it’s unlikely that a company such as Target would be willing to purchase upwards of 300,000 Apple Watches for its minimum wage associates. A $60 Fitbit tracker is a far easier sell than a $300 Apple Watch.
Of course, Fitbit’s corporate wellness business remains unproven. It’s seeing strong momentum, but it’s unclear if it will last, or if companies will remain to repeat Fitbit customers over the coming years. Still, it’s clearly one of Fitbit’s most attractive opportunities and a segment that should be watched closely by Fitbit investors.