The NPD Group is predicting that 9 percent of American adults will own a smartwatch by the fourth quarter of 2016. Around 21 million Americans will own smartwatches at that point, NPD predicts, while 32 million will own dedicated activity trackers.

But the firm projects that activity tracker adoption will peak at 32 million, while smartwatch adoption will continue to grow, potentially eclipsing activity trackers over the next few years.

“The smartwatch will clearly begin to take a bite out of the activity tracker market moving forward,” Eddie Hold, vice president of NPD's Connected Intelligence group, said in statement. “The fact that the health and fitness apps on smartwatches are a key marketing focus will help draw consumers away from the simpler trackers.”

NPD Group points out that activity trackers have a problem with stickiness, as 40 percent of activity tracker owners stop using the device within six months. Smartwatches, on the other hand, give consumers a lot of reasons to wear them beyond health and fitness applications, and may be more likely to garner continuous use.

Not all activity trackers will meet the same fate though, Hold said. Those that target dedicated athletes might fare better than those aimed at the general populous.

“The good news for activity trackers is that we are seeing a clear opportunity at the more sports-focused end of the landscape,” he said. “There is demand for a more sophisticated class of activity tracker that supports GPS and heart rate monitoring, while also being a little more rugged and waterproof. And while we see the simpler fitness trackers potentially hitting a wall, these advanced devices will continue to drive adoption.”

The fate of the smartwatch, on the other hand, will depend on the quality of the health and fitness apps available for devices like the Apple Watch.

“While all of these new products will definitely help drive demand, the real test will be the apps for the smartwatches,” Hold said. “There will definitely be a demand for these devices and the use-case will follow, but smartwatch manufacturers and app developers need to make these products become ‘need to haves’ rather than ‘nice to haves’.”

Last week, ON World made a similar prediction about the dedicated activity tracker and smartwatch markets. ON World predicts that in five years, general purpose smartwatches with fitness apps, such as the Apple Watch, will make up more than 70 percent of the smartwatch market, as supposed to last year, when half of the smartwatch market was made up of dedicated sports devices.