The worldwide smart watch market is set to exceed five million units next year, according to research published this week. Apple is rumoured to be readying a smart watch device this year, and estimates suggest that over 330,000 smart watches were shipped in 2012, led by Sony and Motorola, while recent start-up Pebble Technology joined Sony as a market leader in 2013.

Research firm Canalys estimates that over 500,000 Pebble smart watches will be shipped this year, and a new generation of devices from Apple, Google, Microsoft and Samsung will stir a ten-fold growth in sales by the end of 2014.

According to the research, the new generations of smart watch devices use more sophisticated software and more elegant hardware than previous offerings, with “glanceable” information, sensors and access to web services key features. They are designed to complement smartphone devices, rather than replace them.

“Smart watches will be the most important new product category in consumer electronics since the iPad defined the market for tablets,’ said Chris Jones, Canalys VP and principal analyst. ‘Software platforms tied to smart watches will also be a tremendous opportunity for developers to write apps in categories such as health and wellness or sports and fitness.’

The research firm stressed that hardware design will be critical for smart watches, as consumers will only want to wear fashionable products.

Other challenges the devices face include strict power constraints prohibiting cellular technology, the need to facilitate constant Bluetooth connectivity between smart watches and smart phones and the need for custom software.

“An effective smart watch won’t just be a second screen for a smart phone. Creating a competent developer platform specifically for the form factor will be an enormous challenge,” said Canalys analyst James Wang.

“Google and Microsoft must execute more successfully than they have done with their tablet platforms and will have to adapt their business models appropriately.”