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  • Smartwatch Sales: A Low Bar for Apple to Beat!

    February 26th, 2015

    Apple is used to selling many millions of anything they produce. So even though Apple TV hasn’t been out of hobby status for very long, some 25 million of them have been sold. To most tech companies, such figures would be amazing.

    In the smartwatch space, a research company known as Smartwatch Group claims that some 6.8 million of them were sold last year, with an average price of $189. That doesn’t seem terribly high compared to the $349 price for the cheapest Apple Watch. Worse, that’s down from an average selling price of $225 in 2013. Part of that may be the to the fact that 700,000 of those sales went to the Pebble, which can be had for as low as $99.

    But remember this is just a survey, and surveys can be wrong.

    In any case, those numbers cover all the companies making such gear. In addition, Smartwatch Group blames anticipation for Apple Watch is dulling sales last year. Or maybe you can say sucked the air out of the room, because smartwatches didn’t do terribly well in the holiday quarter by any estimate.

    Now even without Apple entering the picture, it may be true that sales will increase to a large degree this year, simply because there will be a greater variety of products to buy. But that assumes those who buy these gadgets like them enough to buy more for other family members, and recommend them to friends and coworkers. If the word of mouth is bad, that would hurt future marketing efforts to expand the market.

    Now unlike most of those other smartwatches, Apple is going full bore into the fashion market. By hiring executives from the fashion industry, Apple is buying expertise to be sure, but Jonny Ive has made it quite clear he treasures fancy devices, including watches and cars. It’s hard to attack his taste even if you don’t always agree with his design choices.

    Just as interesting is how the average price will change with Apple Watch. Even if only a small number of high-end Editions are sold, and price estimates range from $5,000 or so to as high as $20,000 when equipped with the most expensive band, it will have a huge impact. In addition to increasing the average selling price, Apple’s margins will be high, particularly on the more expensive versions that will be sold as jewelry rather than gadgets. Obviously the internal workings of the cheapest Apple Watch and the most expensive version are the same.

    But how many will Apple sell?

    That’s the impossible question to answer. I assume Apple has internal surveys to demonstrate potential demand and all, and there’s a claim that Apple would build five million units for the initial rollout. Total sales estimates for 2015 are pegged at upwards of 25 million, or maybe as high as 40 million. But that would be a particularly fast uptake considering a “mere” 7.5 million iPads were sold in the first six months after it was released.

    Expectations for Apple, however, are extremely high nowadays. So Apple would be expected to beat or exceed total industry sales within a month or so. If demand is strong, you wonder how that would impact other smartwatches. They are by and large sold as gadgets rather than jewelry. Success might also depend on how Apple handles future proofing. You see when someone pays thousands of dollars for a wristwatch, unless they just love to buy lots of them, and have the budget to support such luxuries, they would expect the thing to last for many years.

    But given the pace of technology, Apple Watch will mature quickly from year to year. One suggestion is to allow you to swap out the internal module and replace it at a relatively low price, thus keeping the product current. That would also require retaining the existing form factor for a while to make such swap-outs more affordable, since they’d cover a wider range of potential units. You’d assume, though, that Apple’s design sensibilities would have considered a design that would be meant to exist for a number of years.

    In other words, the technology would continue to advance without actually making it look much different. It’s not the same as the Samsung strategy of having a number of smartwatch configurations, some even using different operating systems.

    Now at some point, Apple will change the Apple Watch form factor, perhaps making even smaller designs with essentially the same components. That, again, would depend on how technology progresses and what sort of additional features Apple might want to bake into the product.

    I am wondering, for example, when it will be possible for Apple Watch to do all or most of its stuff without tethering to an iPhone. When that happens, sales growth would soar since you wouldn’t be forced to own a recent iPhone to get the most value out of them. I predict a year or two at most. But those products are likely already under test, and that will fuel even more rumors.



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