I've been following TomTom's situation in the market for months. It's not that it's a company with low profitability, quite the opposite, but lately it's been directing all its efforts to parts of its business where they are leaders and are leaving other divisions, such as Sports.
The situation is complicated. At the end of September announced the dismissal of 136 workers of the sports division, some of which are at the top of the chain of command, so it is not a mere reorganization of workers or redistribution of tasks. These are roles in the company that have been left empty and which no one has yet come in to replace.
It's not something you just intuit, they've expressed it themselves in the words of CEO Harold GoddijnThe wearables market has not lived up to expectations, and for this reason, and because we want to focus on our Automotive, Licensing and Telematics businesses, we are reviewing strategic options for Sports.
He continues: "Our strategy is to continue our development in navigation technologies to provide location-based content, software and services for business customers, with high margins and recurring revenues.
This was after the earnings presentation to investors in the second quarter of 2017The division's sales (included in consumer and other end-customer products) fell by 20% compared to 2016.
True, not all of the losses are in the Sports section, as that category also includes car navigators, which is clearly in decline. But the figures for the second quarter of 2016 did not yet include the new Runner 3 and Adventurer that were introduced later, so even the renewal of the range has not served to maintain decent numbers.
And it doesn't stop there. A couple of weeks ago they showed third-quarter figures, and the bleeding is even greater.
-And they are also lowering the 2017 forecast from 950 million euros to 900 million euros, "thanks to" the Sports division. In other words, from the top they are putting names and surnames to those guilty of the bad figures.
You don't have to look far for guilt
The truth is that the situation in which they find themselves is partly due to a lack of foresight in the development of new products and the poor performance of others.
A device that probably hasn't even come close to sales targets has been TomTom TouchThe Dutch were late in coming to the market for activity monitors with a novel approach such as body composition analysis, but seem not to have caught on in the market. Amazon Buyer Reviews are not very favorable either.
The range TomTom Runner 3/Spark 3 and Adventurer The results will have been moderate, but since the changes they saw with respect to previous models were not too great, it is logical to think that not many owners of previous models have chosen to switch to the new model.
And here I think is the main culprit of the drop in sales of TomTom, which is none other than the lack of evolution of their product. Except for some small differences, the software proposal of the clock is the same since the original TomTom Runner. Yes, they have changed the web and improved the mobile application, but the features offered by the clocks have not seen great improvements. The change from Runner 2 to Runner 3 has simply brought the addition of navigation, but the training options and other types of metrics are exactly the same. And one of the most requested improvements, as is the possibility of training intervals with respect to a target (something quite basic), is still not present.
TomTom has always based its strategy on supporting quite a few events and quite a few athletes, thus trying to obtain some visibility. But in my opinion, the effort they make in promoting themselves has not been matched by an effort in the technical part. They even sponsor athletes who participate in competitions where their product is not viable, as is the case with Iván Raña or Saleta Castro. And the fact is that TomTom's multisports devices are quite basic and not very compatible with triathlon. You cannot hold a competition by linking the three sports, and they do not support swimming in open water. It is also not possible to pair a power meter, which is key for any long-distance triathlete.
Therefore, any follower of these athletes will see that they wear TomTom (although on many occasions they compete without any kind of watch, as is the case with Raña), but they do not consider buying it because they are simply not suitable for their sport. I think that this is a tremendous strategic error and that these resources should be used in other aspects.
The future of TomTom
If you ask me how I see TomTom's future, I honestly wouldn't know what to tell you. Obviously they are reviewing their market positions, something logical and that any serious company would do after the notable drop in sales of the Sports division. The segment they have always focused on has been occasional and not high-level fitness, which is being invaded by smart watches with the Apple Watch at the head. Besides covering the same segment they also allow music playback, which is the star feature of the Runners. That is why they are suffering so much, and the truth is that it is not easy to fix beyond a major product restructuring.
Other manufacturers are not suffering as much impact as they have many more sectors in which they compete, but TomTom has a very limited range of products known on the market (the Runner/Spark and Adventurer) and others with a merely testimonial presence on the market (TomTom Bandit and Touch).
There are three options at this point:
- TomTom internal restructuring and focus on new differentiated products
- Closure of the Sports Division
- Sale of the Sports Division and other patents they may have to other manufacturers
Of the three options, the last one is the most feasible and I doubt that TomTom is considering turning around the current concept and preparing new devices, especially after having fired key figures from the organization and not replacing them with anyone.
In short, it would be a really negative point for the market to lose a competitor with the importance of TomTom, at least in the European market.
Thanks for reading!