AIB Featured Business – Fitbit
The world of wearable tech is exploding, and no company within it is exploding faster than Fitbit. Founded in 2007, the company went public in June 2015 and is now valued at over $US8 billion. That’s a feat made all the more impressive considering that Fitbit also has a lot of competitors, from Apple to Nike, and has successfully maintained its position as best in field. In 2015, Fitbit shipped over 18 million fitness trackers, all without launching a single new product.
Fitbit makes wearable, wireless sensors that track physical activity and present the data in a shareable way. From the original Fitbit, which was little more than a ‘smart’ pedometer, the range has expanded into watches and bracelets that measure heartbeats, track sleep patterns and use GPS trackers to measure distance and pace. Fitbit syncs with a number of diet and fitness apps, and encourages social sharing of results to increase motivation.
Fitbit was founded by James Park and Eric Friedman in early 2007. At the time, the closest thing to the product they envisioned was a basic pedometer, so they were building from scratch. Their first round of funding came from family and friends, including Friedman’s father. It quickly became apparent that the $400,000 they’d raised was nowhere near sufficient, and they took their idea to potential investors with little more than a circuit board in a wooden box. Even without a prototype, investors were interested, and the following year Fitbit raised $1million. In September 2008, they had the opportunity to present their idea at TechCrunch 50, hoping for 50 preorders of the product they still hadn’t finished developing. Instead, they took over 3,000 – and completely failed to deliver them on time. They promised to ship by Christmas, but as Park said: “we didn’t say Christmas of which year”. By the end of 2009, when the product was ready to deliver, back orders stood at 30,000 and the fledgling company was in deep trouble.
Fitbit was in uncharted waters, neither of its founders had manufacturing experience, and the device prototype hit barriers that threatened production. The radio signal wasn’t long enough, a display cable was too close to the antennae, and Fitbit almost ran out of money trying to fix the problems. At the last minute, with the company ‘close to death’, the duo came up with a last-ditch solution: placing a tiny bit of foam on the circuit board. The production run went ahead, and Fitbit was finally in stores.
From the beginning, profit margins were good because Fitbit was selling directly to retailers. They made the decision to target a few big retailers, rather than a large number of smaller outlets, so that the price would remain consistent. And once the product was ready to sell, it sold in its thousands.
In those early years, Park and Friedman ran the manufacturing side themselves, learning as they went. The product went through several early updates, keeping it ahead of the pack even as the field grew more crowded. From the original 2009 model, which measured steps and calories burned, it was quickly updated to include an altimeter and digital clock. That was in 2011. In 2012, the Zip and Ultra joined in; both used Bluetooth to sync data to iOS and Android device, with the One tracking sleep and floors climbed as well as steps and distance. By 2013, Fitbit rolled out their wrist devices, which moved them into the watch market as well as fitness. Those early wrist bands had some complaints, with customers finding that the nickel irritated their skin, and they were recalled and redeveloped. Since 2014, the company has continued to concentrate on increasing utility, but with a big emphasis on aesthetic design as well. The newest model, the Fitbit Alta, is a sleek wrist model with interchangeable bands that include camel leather and a stainless steel silver bangle. The shift in focus means that Fitbit isn’t only a fitness device, but an accessory in its own right.
Not only did Fitbit identify a gap in the market, it created a need. Before Fitbit, most people didn’t know that their fitness metrics could be tracked: after Fitbit, the need feels so genuine that some researchers have warned about “the quantified self” phenomenon – when relying on eternal metrics becomes more important than how our bodies feel. From a marketer’s point of view, that’s a dream result.
The other thing that Fitbit did was tap into the emerging phenomenon, encouraged by social media, to share personal data. As well as knowing how many steps you took yourself, the online syncing of exercise data meant that you could share that information with friends and compete to get to more steps. Fitbit encourages this, setting up goals and competitions that you can sign up to on a daily or weekly basis, and displaying ‘leaderboards’ amongst your friends. It adds an extra layer of motivation on top of Fitbit’s usual gentle exhortations to move more, but it can also backfire. Originally, the Fitbit app was set so that user data was shared by default. Users who didn’t opt out found that they’d be unwittingly sharing personal data without wanting to. In 2011, Fitbit changed the default setting to private.
With so many other competitors now in the wearable fitness game, how will Fitbit continue to thrive? At the moment, it maintains its place as market leader in part because its offerings are significantly cheaper than its competitors and in part because, as the first, it benefits from brand recognition. But although the market is projected to be worth $50 billion by 2018, Fitbit isn’t resting on its laurels. Park recently met with US lawmakers ahead of an anticipated move into medical devices. At the moment, Fitbit data is purely for consumer use and interest; Park sees a possible shift into that data being collected for clinical research, and the tracking technologies expanded for people with health concerns. As an example of the latter, Park talks about making a sleek, attractive wearable that can track blood glucose for diabetes sufferers.
Having publicly listed in mid-2015, Fitbit is well placed to move into emerging markets. But for now, it’s succeeding at doing what it does best, and with an estimated 72% of the wearables market, it can keep doing it for a long time.
This article was written by Tanya Ashworth-Keppel on behalf of the Australian Institute of Business. All opinions are that of the writer and do not necessarily reflect the opinion of AIB. The following sources were used to compile this article: Wareable, Sydney Morning Herald, Pando, Journal of the American Medical Association, New York Times and Time Magazine.
Image Credit: Forbes