Lack of Consumer Interest Top Challenge to Nascent Health Technology Market

SAN DIEGO -- Cracking the health technology market will be challenging for the consumer electronics industry, panelists said Monday at the CEA Industry Forum. It’s a market the industry has pegged high hopes on, as indicated by the six sessions devoted to the topic. “It’s a growing space, said Ben Arnold, senior research analyst for CEA, as the industry “keeps expanding the definition of consumer electronics,” he said. Health and fitness technology offer a “vibrant opportunity” for CEA to engage more companies and do more work, and consumers “want to use the stuff they already own to improve health and wellness,” he said.

But consumers have yet to show much interest in signing on, said Ben Arnold, senior research analyst for CEA. Arnold presented results of a CEA Market Research online survey done in September in which 1,679 U.S. adults were asked about health and fitness technology. According to the study, just 36 percent of consumers said they would be interested in sending health data to their doctor via a wireless device; 33 percent are interested in managing their health records online; and 32 percent would be willing to consult with their doctor via online video.

At the top of consumers’ concerns were a reluctance to share personal data wirelessly and a lack of interest overall in health and fitness technology, Arnold said. Key findings were that the industry will have to raise the profile of health technology with trusted sources including doctors and healthcare providers to win consumer acceptance, that the standard rules of CE marketing won’t apply to the health technology user that’s different from the typical CE consumer, and that the industry will have to ease consumers’ concerns over privacy, Arnold said.

Eisuke Tsuyuzaki, Chief Technology Officer of Panasonic, said health technology is in its “very early days.” For Panasonic, it’s a “number one or number two initiative,” Tsuyuzaki said. Health and fitness devices now are single-item products that “may or may not be connected,” he said. A stable connected home environment, a requirement for technology that people base their health on, “is still a huge challenge,” he said. Once that’s secured, it will be possible to have data applications on top of the network, he said.

It will be important to move beyond “the health nuts” that use technology for running or biometrics, but “we have to find a compelling reason why it’s necessary,” Tsuyuzaki said. Today people go to a doctor when something is wrong, he said. The financial pressures in the U.S. mandate that “healthcare has to be cheaper,” he said, and part of that comes from changing consumer behavior toward preventive personal healthcare. “The technology is there but we haven’t figured out how to connect it all yet,” he said. One step is to form consortiums to establish standards so that health devices can talk to each other he said.

The rate of startup activity in health technology is “off the charts,” said Tom Rodgers, a partner with ATV Capital Investors. “The majority of the folks are techcentric who believe that technology is the barrier to the field moving forward,” Rodgers said, “but technology is the least of the problems.” He estimates that five to 10 percent of people care about health technology, and those are largely fitness buffs or who have specific health problems. The other 90 percent “aren’t motivated,” he said, and won’t be until they're held accountable for their lifestyle choices. Companies competing in the space will have to go after employers or insurance companies to have them motivate people’s behavior or target chronic disease management, he said. “Most employers are self-insured,” he said. “They're desperately trying to figure out how to bend the cost curve” and may be willing to participate in a pilot program where “incentives are aligned,” he said.

Companies will need a clear picture of services that will use the health data, how to compensate doctors for looking at the information and who will pay for the devices and service, Rodgers said. “If you track data, what will you do with the data?” he said. Innovation will be key as well. “There’s lots of gold out there, but the world doesn’t need another fitness and activity monitor,” he said. Navigating FDA regulations will also be an issue, Rodgers noted.

Tsuyuzaki of Panasonic believes there will be a “significant shift” in healthcare in three years due to healthcare reform and the need for more cost-efficient forms of medicine or therapies. “There are financial pressures to make the system more efficient,” he said. But there needs to be a way to make consumers care in a way they don’t today, he said. That could come from messages such as, “Do you want to live 5 years longer?” he said.

Traditional retail channels “aren’t ready” for health technology, said Arnold of CEA. He suggested that healthcare providers be the initial intermediaries that consumers go through to get health tech products. “Maybe there’s a space for healthcare providers to be in partnership with the retail channel,” he said.

CEA Industry Forum Notebook

President Barack Obama’s recent signing of free trade agreements (FTAs) with Colombia, Panama and South Korea will “save exporters a whole ton of money, especially small businesses,” Richard Ginsburg, a senior international trade specialist in the Small Business Administration, told the conference in an Export 101-type workshop. “The U.S. allows imports at relatively little or no cost to foreign exporters,” Ginsburg said. “The converse doesn’t hold true, in that we still pay. So it’s been costing small businesses a lot more to ship to specific ports. Between South Korea, Colombia and Panama, there’s an estimate of how many hundreds of billions of dollars in increased exports there will be by those who are already exporting to these three countries. But there’s also a specific expectation because it’s going to be a lot cheaper for you to get your goods into their marketplaces.” Skullcandy, a supplier of “youthful” CE accessories, plunged into export markets in a big way about 15 years ago, when it was doing less than $5 million in annual sales, said Aaron Behle, vice president of international sales. Today, Skullcandy’s annual sales are “north” of $200 million, he said. “I'm a big fan of Brazil” as an export market, Behle said. “From a manufacturing standpoint, if you're looking at eliminating or hedging a risk in terms of China manufacturing or Asia manufacturing, Brazil is a great opportunity. There’s a great operating network there in terms of retail expansion. And from a macro perspective, the economy there is very healthy. Post their banking crisis in 2001, the leadership there has done a phenomenal job to build out a solid infrastructure.” Still, there’s little prospect of the U.S. reaching an FTA with Brazil anytime soon, said Aaron Brickman, deputy executive director of the Commerce Department’s new Select USA program, which promotes American goods overseas. “Pre-FTA” talks between U.S. and Brazil are not even on any roadmap, Brickman said. “It’s very tough to export into Brazil” because of that country’s “very high non-tariff barriers,” said Paul Sabbah, president of Stamford International, a sales and marketing management company specializing in export sales and international market analysis and development.