Only 205,000 smartwatches were sold in Australia in the first half of 2015, despite heavy promotions around the devices.
Telsyte's latest 'Smartphone and Wearable Devices Market Study' found the initial buzz around smartwatches has softened and a lack of killer apps is holding back demand.
Smartphones are still the preferred device for most users and surprisingly, around 10 percent of smartwatch users have stopped using their device altogether, the research found.
Apple secured the number one position in the smartwatch market with a 64 percent share in the first half, beating out Samsung and LG.
Telsyte managing director, Foad Fadaghi, said the Apple watch remains a luxury gadget with its sales price typically more than twice the average of rival Android-compatible smartwatches.
"It is difficult to see mass market consumers paying as much as premium tablets or smartphones for wearable technology that does not have significant or unique features," Fadaghi said.
Sales of smart wristbands - such as models sold by Fitbit and Garmin - grew by 30 percent this half on the second half of 2014. Telsyte estimated that there were around 2 million smart wristband users in Australia.
Meanwhile, around 17.2 million Australians - 72 percent of the population - own a smartphone with 3.7 million units sold during the first half of 2015 (down 6 percent from a year ago).
Sales and Android-based smartphones pulled ahead of the Apple iPhone during the first half with a 54 percent and 41 percent share respectively.
Only 5 percent of sales were Windows Phone devices due to the lack of new handsets and Microsoft's transition away from the Nokia brand.
Sony overtook HTC in the first half to become the third largest smartphone vendor in Australia behind Apple and Samsung.
Source: CIO Australia
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