Only One Million?

April 14th, 2015

The launch weekend of a new product is usually big news for Apple. It didn’t always turn out that way, but when customers began to wait for days or weeks to buy a new product from Apple, it became a media event. Apple was only too happy to benefit from the hype. But the merest suggestion that the crowds aren’t so large might work against the expectation that sales will hit new heights.

Even when Apple has reported record sales, sometimes the media doesn’t care. Take the opening weekend for the iPhone 5 in 2012. Apple reported that sales topped five million, but the media and some industry analysts were disappointed, because they somehow believed Apple should have sold twice that number. Despite the statement from Tim Cook in an Apple press release, that “we have sold out of our initial supply,” it didn’t matter. Facts often don’t when there’s an agenda at work

With the Apple Watch it’s uncharted territory. I mean there were reasonably successful smartphones before the iPhone broke through, and less successful digital music players ahead of the iPod and tablet computers ahead of the iPad. But smartwatches are a pretty recent development. When one company, Pebble, boasts of selling one million units since 2013, you can bet expectations are modest.

Ahead of the launch of Apple Watch, estimates were all over the price, from a few million to maybe 40 million or so for the first year. But how many will Apple move on the launch weekend? If supplies are very tight, as they appear to be, will it even matter?

Well, unless stocks are unexpectedly replenished, Apple sold out of its initial allocation within minutes or hours, depending on the model, last Friday. The Apple Watch actually is due to ship on April 24th, but you have to wait until June or later if you order one as this column was written.

So how well did Apple do on the first day preorders were accepted? Well, Apple hasn’t revealed anything — at least not yet. Sure, it would be nice to know, but an order isn’t final until it ships, and it’s always possible some will cancel because they don’t want to wait, or have changed their minds.

But that doesn’t mean preliminary data isn’t already out there, although it’s just a survey. So Slice Intelligence, a Palo Alto, CA-based market research company that appears to specialize in tallying estimated online sales, claims some 957,000 people in the U.S. preordered an Apple Watch the very first day. If true, that might represent only a fraction of the demand, since Apple also accepted orders in several other countries around the world, including China. So final figures might be double that or even higher. Nobody outside of Apple knows for sure.

Now there are curious things about the survey. One is that customers bought an average of 1.3 smartwatches, despite early reports Apple would only accept orders for one unit at a time. But I suppose placing a second order would flesh out these numbers if Apple accepted them. The rest of the survey seems sensible enough, that the cheapest model, Apple Watch Sport, garnered 62% of the preorders. An average $503.83 was spent on each unit, which is no surprise either.

The rest of the numbers are interesting from an academic point of view. Most sales consisted of the larger 42mm models, and the Sport model in Space Gray appears to be the most popular. Such figures also explain why Apple sold out of some models really fast, within minutes, while others were available for on time shipment for several hours.

I could, I suppose, quote some of the other numbers, but I won’t. For one thing, Slice Intelligence has not yet amassed a long-term record for accuracy; the firm began taking surveys in 2012. The worldwide publicity for the Apple Watch report is clearly the result of smart planning and marketing, regardless of the precision of the final figures.

It’s also difficult right now to assess the value of their methodology: The results are evidently based on records of online digital transactions using a user base of two million. But how were they recruited, and do they represent an accurate cross-section of the online population? Traditional polling organizations, such as Gallup, use far smaller scientifically selected samples, and claim accuracy rates of plus or minus a few percent.

The other problem is that these analysis companies seldom explain or correct results when they are shown to be dead wrong. If Apple discloses initial Apple Watch sales on April 27th, at the conclusion of the launch weekend, you’ll know the results met or exceeded the company’s expectations. Based on those numbers, if they are released, we’ll have a better picture of how well Slice Intelligence actually performed in the real world, assuming Apple drills down to revealing preorder data. But don’t expect such detail.

For now, Slice Intelligence has succeeded in one way, which is to get loads of uncritical press coverage. That will likely mean more customers for their services. So it may not matter how the real numbers actually turn out, but if they appear to be close to the mark, there will be lots to boast about. But if they are far from reality, don’t expect paying customers to ask for their money back, or for a news media lusting for news, any news, about Apple, to revise their pieces with accurate information.

In the meantime, a roughly one million figure has been echoed by other analysis firms, such as Cowen and Co. and Piper Jaffray. So maybe there’s some truth to that number after all.

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