apple iwatchVendors shipped just 3.5 million smartwatches in 2Q 2016, a precedent-setting 32% year-over-year smartwatch sales decline, according to preliminary market data from the IDC Worldwide Quarterly Wearable Device Tracker. Vendors shipped 5.1 million units in 2Q’15.

Apple shipped 1.6 million smartwatches in 2Q, tops for the quarter. That said, Apple was the only one of the top 5 vendors whose shipments declined YoY. Apple introduced its smartwatch in 2Q’15, which makes for a tough comparison, however, IDC highlights in a press release about the smartwatch sales decline.

More broadly, consumers held off buying smartwatches in early 2016 in anticipation of new model introductions later this year, IDC Mobile Device Trackers senior research analyst Jitesh Ubrani pointed out.

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Analyzing the Smartwatch Sales Decline
“Apple still maintains a significant lead in the market and unfortunately a decline for Apple leads to a decline in the entire market. Every vendor faces similar challenges related to fashion and functionality, and though we expect improvements next year, growth in the remainder of 2016 will likely be muted,” Ubrani was quoted in the smartwatch sales decline press release.

IDC highlighted developments among the top 5 smartwatch vendors for 2Q:

Apple: Despite a down quarter, Apple remains far and away the market leader in smartwatches. Apple faces the same challenges as other OEMs, but the pure exposure of the device and brand through tactical marketing gives it a leg up on the competition. Watch 2.0, along with updates to watchOS, could help drive existing user refresh and more importantly, a new wave of first-time buyers.

Samsung: The Korean vendor has done well with distribution through American telcos and this has paid off as Samsung holds the number 2 position among the top 5 smartwatch vendors. In particular, the Gear S2 lineup is off to a great start as Samsung has successfully de-coupled the smartwatch from the smartphone. Focusing on the telco channel to drive future success in telco-driven markets is likely to remain the core strategy for Samsung moving forward.

Lenovo: The first-mover advantage is still paying off for the Motorola brand as it continues to be the smartwatch of choice for those interested in Android Wear-based circular displays. Moto’s recent attempt to branch out to the fitness market with the Moto 360 Sport have been met with mixed results as the device still lacks some of the benefits of fitness-first devices from the likes of Fitbit, Garmin, or others.

LG Electronics: The Watch Urbane recently intoduced a new SKU supporting LTE connectivity. Like Samsung, LG’s growing presence in the US telco channel has proven beneficial as the operators seek new revenue streams. Though LG is first to offer an LTE-enabled Android Wear watch, the lack of complete support from Google – Android Wear 2.0 is set to launch later this year with support for LTE – stifles the device’s aspirations.

Garmin: Rounding out the top 5, Garmin has almost doubled its share since last year due to the introduction of new smartwatches like the Fenix 3. Though the number of apps and Connect IQ-enabled devices have grown over the past year, they still remain relatively small and cater to a niche audience – athletes.

The absence of traditional watchmakers in the smartwatch market is notable, IDC Wearables team research manager Ramon T. Llamas commented. “To date, only a small handful of traditional watchmaker brands have entered the smartwatch market, trailing far behind their technology brand counterparts.”

Casio, Fossil and Tag Heuer have launched smartwatch models. ¨Participation from traditional watchmaker brands is imperative to deliver some of the most important qualities of a smartwatch sought after by end-users, namely design, fit, and functionality,¨ according to Llamas.

Leading traditional watchmakers’ ability to bring brand recognition and global distribution networks to the smartwatch market should add growth momentum to the smartwatch market, he added.

“What will bear close observation is how the smartwatch market evolves from here,” Llamas concluded. “Continued platform development, cellular connectivity, and an increasing number of applications all point to a smartwatch market that will be constantly changing.¨

The upshot is that the smartphone sales decline likely is only temporary. All things considered, however, IDC doesn’t expect growth to resume until 2017. Vendors need to make a better case to consumers to spur sales and usage, researchers said.

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