Smartphones and to a certain point tablets have finally saturated the U.S. market. And although these two products still remain extremely profitable businesses, companies like Apple, Google, and Microsoft are already searching for the next big thing. It looks like that will be wearables - specifically smartwatches.
The smartwatch market is currently dominated by Pebble, Fitbit, Jawbone, and Motorola (although it’s Google really, since the Moto 360 is running Android Wear). There are dozens more, smaller companies that compete in this space, but their market share is negligible. In fact, the whole smartwatch market is extremely young.
Most people use smartwatches as fitness trackers, and fitness enthusiasts are only a tiny subset of the market as a whole. They're the niche. The Fitbit and Jawbone Up compete here not because they don't make a more powerful watch, but because they can't. Making something like the Apple Watch requires incredible engineering, doctorate, programming, design, and supply chain talent, which these smaller companies can't fund. When the Apple Watch was announced, many pundits mentioned that unlike other Apple products, this one does too much. But that’s precisely what only Apple can do, and other smaller companies cannot compete with. There is money in in the fitness wearable market, but not enough money for all of these competitors to divvy up. Once Apple enters the wearable market, many fitness enthusiasts will leave the fitness wearable niche in favor of the consumer smartwatch market, making it even more difficult for the little guys. It’s classic disruption theory.