Editor's Note: Inc. Magazine announced its pick for Company of the Year on Monday, November 23. It's Slack! See which one Inc. readers chose as their favorite company of 2015. Here, we spotlight Fitbit, one of the contenders for the title in 2015.
Fitbit is to fitness trackers as Band-Aids are to adhesive bandages. If you see someone wearing a rubbery wristband that takes his vitals and records his sleep patterns, you might automatically refer to the device as a Fitbit--even if it's a different brand.
Through emphasizing software as much as physical products and staying focused on a clear mission, Fitbit has managed to corner a crowded market in which it competes with the likes of Garmin, Jawbone, and Apple.
This year marked a high point for Fitbit, which has seen growth of 5,000 percent over the past three years. Co-founders James Park and Eric Friedman took their San Francisco-based startup public in June at $20 a share. Shares jumped to $30 the first day of trading, placing the company at a valuation of more than $6 billion.
Fitbit beat analyst expectations in both its second- and third-quarter earnings this year. The company reported earnings of 19 cents per share on revenue of $409.3 million in the third quarter, compared with an expected profit of 10 cents a share on $358.7 million in revenue. A subsequent release of shares showed less enthusiasm for the company, however.
The company shipped 4.4 million units in the second quarter, 800,000 units ahead of Fitbit's closest competitor, Apple Watch, for market share dominance among wearables. That lead seems likely to continue. Market research firm NPD says Fitbit "remains the only activity tracker brand that consumers request by name on a regular basis," and reports ownership of Fitbit devices has increased 13 percent since February. NPD projects wearable ownership overall will increase 4 percent during the holiday season.
Since launching in 2007, Fitbit's mission has remained the same, CEO Park told Inc. earlier this year. "How do we use technology to help people get healthier and more active, specifically by giving them data and guidance and inspiration?"
That guidance has come in the form of fitness and wellness tracking devices, including wristbands and snap-on items, corporate wellness programs, and data analytics software. Products and services don't just target the fitness focused, but also people seeking to improve sleep habits and track how much they walk.
"Fitbit has a very strong position in the market for fitness trackers, and they are one of the strongest in the wellness market as well," says Gartner Research director Angela McIntyre, who focuses on wearables.
Fitbit gets an edge on competitors through its focus and consistency. Nike has experimented with fitness trackers by releasing Nike FuelBand, but the tracker was part of an integrative strategy for the athletic brand, not a focus, and marketing for the product has fallen off, notes McIntyre. Where Jawbone, arguably Fitbit's most similar competitor, shipped its UP3 devices four months late, Fitbit has consistently released products on time.
"We don't focus on beating competitors," Friedman, the company's CTO, said earlier this year. "We are just trying to build great stuff for users, which has been our mission since day one. Part of the fun in building a consumer company is to build things consumers want. If you keep building stuff they like and love and stay focused on that, that's the most important thing."
The company has also taken a proactive approach to problems. Fitbit was quick to recall the Force when consumers reported skin rashes from the product. It also aggressively employed customer service in dealing with other instances of skin irritation by products, says McIntyre. Skin reactions continue to be an issue for Fitbit, in part because the company has more in common with Band-Aids than name recognition.
"They're not going to totally overcome this, because a lot of materials in fitness bands are the same as in Band-Aids," says McIntyre. The rashes users of the Fitbit Force experienced were caused by adhesive used in the strap. The adhesive material on bandages is a known allergen.
Going forward, Fitbit has unique opportunities stemming from its analytics software. Expanding compatibility of software to competing fitness trackers will be key to maintaining market share. Greater compatibility would help Fitbit maintain its appeal among corporate wellness programs in which employees may decide to go with other brands of wearable devices for participation, says McIntyre. She also notes that inexpensive fitness devices, like the $20 Xiaomi band, are now competing with Fitbit's physical products. Compatibility with Apple's fitness app in particular could help clear the way for Fitbit's dominance.
And Fitbit has the chance to create a virtual personal trainer by throwing the depth of its user data behind recently acquired custom fitness routine application FitStar, she says.