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Here's How Apple Is About to Take Some Business Away From Nike

August 19, 2014 | About:
rsconsultant

rsconsultant

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The Nike (NKE) FuelBand was officially released in the U.S. in February 2012 . Initially, FuelBand was available only in one color, Black Steel, and a limited edition color, Ice, was released in July 2012. Nike saw an 18% rise in fiscal 2012 after the introduction of the Nike+ FuelBand.

The Nike FuelBand is in competition with Jawbone UP, Basis watch, and Fitbit Flex. But, the biggest competition is the upcoming Apple (AAPL) iWatch. The Nike FuelBand comes with a simple and attractive design that stays out during most of the physical activities.

FuelBand's future

Nike FuelBand has failed to standout not just among its competition, but also from smartphones. Other fitness trackers have done more than Nike to market their device as multi-purpose lifestyle tools, rather than a single-focus exercise product. Nike FuelBand features include a pedometer that tracks down the steps taken, calories burned and a proprietary app called Nike Fuel.

Nike has also made a companion app for FuelBand, which was available to iOS users initially, but two years later it was also introduced to Android devices. The app provides access to NikeFuel score information and history and is made so that the Android device can connect to the FuelBand as long as it has Bluetooth capabilities.

The Nike FuelBand app is compatible with Android 4.3 and higher versions of it and supports only few handsets at launch, which include Samsung Galaxy S3, Galaxy S4, Galaxy S5, Nexus 5, Moto X and HTC One. The app is an English-only app and is available in the U.S., the U.K, Canada, Germany and Japan from the Play Store.

The NikeFuel score is of no use to anyone who doesn’t have a Nike+ product and also isn’t always accurate. Also, there’s no way to measure distance for specific runs. So Nike FuelBand isn’t useful for athletes who train regularly, and, at $149, it’s pricey for what it does. This may be seen as the end of the Nike FuelBand, the Nike fitness-tracking bracelet that once represented the future of wearable computing.

Apple steps in

Apple can crack the problem of what wearables are really for. With its combination of engineering, design and business smarts, Apple is certainly the best. The Apple iWatch screen will be 2.5 inches, which is the current size of the iPod nano. This is large, though it’s possible that the display could have a curved rectangular shape running around the wrist. Along with the multiple size options, the iWatch also may be available at several different prices.

The Apple iWatch is expected to include a durable and scratchproof sapphire crystal display, something that is very common with higher-end watches. The iWatch will have more than 10 sensors on it, which will largely be focused on health and fitness.

A report from Japanese newspaper Nikkei claimed that the iWatch will feature a curved OLED touchscreen and collect health-related data such as calorie consumption, sleep activity, blood activity and blood oxygen levels.

The Apple iWatch is also expected to feature wireless charging capabilities, advanced mapping abilities, and possible NFC integration. One thing that is not sure is the price of the iWatch, but according to analyst Ming-Chi Kuo, Apple will produce each in various specs and materials. This could mean that price will vary drastically; the high-end models potentially will cost thousands of dollars.

Another analyst predicts the average price of the Apple iWatch will be around $250 .The same analyst added that the iWatch could bring Apple $17.5 billion in revenue in the first year, five billion more than the iPad. In 2013, DigiTimes claimed that the iWatch was scheduled for launch during the second half of 2014, meaning we can see it in the July-September timeframe.

According to a recent survey that said that 14% of watch wearers would pay $350 for an iWatch, around 15 million potential iWatch sales just in the U.S., whereas Nike’s share in the digital fitness market is around 10%, which is not a significant slice. This makes Nike FuelBand hardware division account just for 0.0013% of the company’s sales of $25.3 billion.

Apple will be making around 5 million watches for the initial launch. Apple is likely to sell around 80 million iWatches in the first year, which would be a huge success and its other comparison products. If Apple can only sell 30 million iWatches in the first year, then also it would be a great performance from the company. At a price of $250 at 30 million units, that’s around $7.5 billion in incremental revenue for Apple. Apple is doing about $175 billion a year in revenue, which will be about 4.2% increase in the revenue of Apple because of iWatch .

Conclusion

Apple's brand positioning and its presence in the mobile devices industry can halt the FuelBand's growth, and deprive Nike of an opportunity to tap the fast-growing wearables market. Hence, it is quite likely that Nike's earnings growth might slow down as it sees weakness in the wearables market.


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