Smartwatch sales in Australia grew 89 per cent year-on-year in the first half of the year, to more than one million units – making up one third of the “smart wearable” category.

Apple Watch is the leader with more than 50 per cent share of the smartwatch market, followed by Samsung Gear and Fitbit Blaze, according to a report from Telsyte.

“As smartphone replacement cycles have lengthened, consumers are turning to other gadgets and smartwatches have started to capture the imagination,” said Telsyte MD Foad Fadaghi. “We might be seeing the beginning of a substitution effect, where consumers are choosing a smartwatch over a new smartphone.”

Last year smartwatches accounted for just a quarter of smart wearable sales.

Telsyte attributed the strong growth to Australians’ focus on health and fitness, with many upgrading to smartwatches from smart fitness bands such as those produced by Fitbit and Garmin.

Price reductions and wider distribution through carrier channels are also driving sales, as is the greater availability of mobile contactless payments on smartwatches, which can make the payment experience faster than with a card or smartphone.

“The killer apps for early adopters of smartwatches seem to be fitness apps and mobile payments,” Fadaghi said.

Telsyte forecasts 37 per cent of Australians will be wearing a smart wearable (both bands and smartwatches) by 2020, with a substantial increase in sales in 2017 and 2018 driven by the arrival of a second generation Apple Watch, continued price decreases, and more uptake of mobile payments on Apple and Android compatible wearables.

Telsyte estimated 14 per cent of Australians (all ages, approximately 3.5 million) currently wear a smart wearable device of some sort.