In its registration document filed in the run-up to its IPO, Fitbit highlights stats and insights that support its growth. It takes note of the increased spend in the corporate wellness industry, the rise in wearables sales generally and helpfully notes its market domination — it holds 68 percent of the fitness activity tracker market referencing NPD Group.
One of Fitbit’s strengths is that it recognized early on the value of supporting its wearable with an app that could be accessed from a smartphone. Its users can sync Fitbit devices with, and view their dashboard on, their computers and more than 150 mobile devices, including iOS, Android, and Windows Phone products, according to the document. It believes the wide compatability increases the number of friends and family in each user’s network to share their information. That helped it reinforce growth and user retention.
Registered users have increased from 1.1 million three years ago to 19 million as of the end of March this year. What would be more interesting are stats on active users, given the propensity of consumers to buy wearables and stop using them a few months later.
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Rise of employer wellness It is also banking on an increase in employer wellness plans. It cited IBISWorld estimates that the corporate wellness industry will grow from $7.4 billion in 2014 to $10.4 billion in 2018 in the United States. Although it’s a positive indicator for the company, it doesn’t necessarily mean that Fitbit adoption will be joined at the hip with it.
Data security The fact that the company shares user information with an undetermined number of third parties creates plenty of potential for security breaches, a risk the company notes. It collects users’ health and fitness-related data and other personal information such as names, addresses, phone numbers, email addresses, payment account information, height, weight, and biometric information, but with user consent. It did note that it doesn’t currently share information such as heart rate data or geolocation data with employers through corporate wellness programs and doesn’t intend to share that data in the future without specific user consent.
Litigation The company has suffered legal backlash deriving from its Fitbit Force causing skin irritation. It noted $4.3 million in legal fees as one contributor to a jump in general and administrative costs from 2012 to 2013. “A large number of lawsuits, including multi-jurisdiction complex federal and state class action and personal injury claims, were filed against us relating to the Fitbit Force. We have also had several consumers bring lawsuits relating to our Fitbit Flex product.” The cost of the Ftbit Force product recall was $2.8 million. So far it has settled the class action lawsuits, but it still faces personal injury claims although it says it doesn’t believe these proceedings tied to Fitbit Force or Fitbit Flex are material.
Largest retailers In notes that 45,000 retails in 50 countries sell its wearables. In 2014, its five largest retail partners and distributors accounted for 54 percent of its revenue, including Wynit Distribution, (13%) Best Buy, (12%) and Amazon.com (11%).
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One manufacturer Flextronics is its primary contract manufacturer and produces most of its devices. It will be interesting to see whether a post IPO Fitbit looks for additional manufacturers to reduce risk.
How will the market respond? Fitbit has played the long game and took its time before filing an IPO. It waited until it made a profit, until it established market dominance. There is a lot of interest in the healthcare realm in devices that can demonstrate and track activity levels especially to provide more contextualized information alongside other types of monitoring devices such as glucometers. But it’s an open question whether Fitbit will be interested in developing or using more sophisticated sensors that a clinical user group would likely demand.
