Is the Apple Watch the Next Huge, Medium, or Mini Hit?
The Apple Watch isn’t going on sale until next year, but already everyone from Wall Street analysts to luxury fashion executives is trying to handicap future sales of the groundbreaking device.
Among the finance set, estimates range from a few million to almost 40 million in the first year of sales. “The detail that went into the design, including the watch bands, is impressive and not fully appreciated yet,” UBS analyst Steven Milunovich wrote in his assessment of the watch. He sees 24 million sold in the first year and 40 million in the next year.
One of the most optimistic analysts, Brian White of Cantor Fitzgerald, expects Apple will sell 37 million watches in the first year, outpacing the 20 million iPads sold in the tablet’s first 12 months. “We believe Apple Watch will prove to be a home run with the fastest, new product, first-year unit sales volume in the company’s history,” Fitzgerald said last month on CNBC.
Apple competitors were unsurprisngly less generous. Jean-Claude Biver, head of LVMH’s luxury watch unit, is predicting a flop. The Apple Watch “has no sex appeal” and “looks like it was designed by a student in their first trimester,” he says.
But Apple’s image of high-tech cool could help revive interest in wristwatches, says Harvard Business School assistant professor Ryan Raffaelli, who studied the resurgence of the Swiss watchmaking industry in the 1990s. He predicts the Apple gadget “could spark a new generation of watch aficionados and collectors.”
Apple CEO Tim Cook unveiled the new watch last month alongside upgraded iPhone models. But, unlike the iPhone, the watch won’t go on sale until sometime next year. “It’s worth the wait,” Cook said. “Apple Watch is the most personal device Apple has ever created.”
Price speculations
The device will come in two sizes and three models. The entry-level model will start at $349, but Apple said nothing more about pricing for the rest of the line — a critical factor for projecting potential sales — leading to wide-ranging speculation.
A jewelry industry source “familiar with the matter” guessed that the gold-cased Apple Watch Edition would start at $1,200, TechCrunch reported. Longtime Apple observer and blogger John Gruber thinks the midrange model with an upgraded sapphire screen will start at $999 with the gold-cased Edition model at $4,999. Ariel Adams, a writer at the watch specialty site aBlogtoWatch, told Yahoo Tech that the top end could exceed $10,000. “It’ll be a much more exclusive product,” he said.
Whatever the price of the middle and high-end models, Apple could expand its sales reach by expanding beyond its usual retail network. Certainly, the watches will be sold through Apple’s own website and retail store chain. But Best Buy and Target may not be the best places to sell a $5,000 watch. Ritzy jewelers are a possibility, but some analysts think a better addition to the lineup would be high-end department stores, like Nordstrom or Saks Fifth Avenue. Such stores already have numerous counters and sections devoted to individual designers. An Apple Watch boutique would fit in well.
“Ultimately, it gets their brand seen in a way it hadn’t before,” says Ben Arnold, an analyst at NPD who is following the wearable computing trend. “It raises the awareness level and grows awareness of the whole category of wearables.”
Even as it becomes more fashion-forward, Apple may need to address concerns about rapid obsolescence to succeed in selling the most luxurious models, however. iPhone owners readily trade in their gadgets every two years, but even the most expensive iPhone costs less than $1,000 — and much less with a two-year contract. A Saks customer who paid $5,000, plus tax, for the gold Edition in 2015 would be angered if just two years later, the third-generation Apple Watch is thinner, faster and makes julienned french fries.
“Continual obsolescence could be an issue,” says Mike Liebhold, senior researcher at the Institute for the Future and a veteran of tech stalwarts Apple, Netscape, and Intel. “I don’t think I’d spring for a $3,500 first-generation gold one.”
Apple offers a program giving iPhone customers hundreds of dollars in credit toward a new phone if they trade in their old models. That has led some pundits to wonder if Apple will offer a similar program, perhaps even with a guaranteed rate of depreciation, for the Apple Watch. Another possibility, considered less likely, would be for Apple to offer some form of hardware upgrades to older watches, replacing the central processing chip or other elements. But making the watches upgradable could require making the devices less attractive and heavier, not the kinds of trade-offs Apple typically prefers.
Apple touted a few functions of the watch at last month’s introduction, but questions remain about just what else it can do as well. The watch will be able to make touchless payments as part of Apple’s mobile payments platform and act as a remote control for an Apple TV, the company said.
Analysts wonder how else the watch will tie into the Apple ecosystem. Acting as a controller and identity token for home automation systems as part of Apple’s HomeKit initiative is likely, analysts said. Apple is also letting developers write and sell their own apps for the watch.
It may be that some as-yet-undreamed-of killer app will actually provide Apple’s best sales help.
