Apple Watch: Upcoming Success or Clear Failure?
Apple (AAPL) is the wonder company of our time. Starting in the 1980s, the company has seen success
, near collapse, and is now a company so profitable that it has almost $200 billion in cash. Being an Apple investor over the past 30 years meant strapping in for an emotional roller coaster filled with really neat gadgets.
Why Does the Apple Watch Even Exist?
The Apple Watch is the latest in a long list of wearables, or electronics that consumers wear on their wrists or bodies to interact with their cell phones, as well as track heart rates and overall health. There has been speculation about an upcoming Apple Watch for years, and when it was finally announced in September 2014 the public was eager to purchase it.
There are a few problems with the Apple Watch. First, it only works with the latest iPhone models. With iPhones costing upwards of $450 and the cheapest Apple Watch priced at an eye-bulging $349, buying the latest Apple gadget means shelling out a huge amount of money upfront.
Sales History
Apple released its product for sale in April, but only online. Apple Watches were available to look at, try on and test out in Apple stores around the world, but orders were only accepted online and were fulfilled at a glacial pace. Three weeks after Apple Watches started to ship, Slice Intelligence reported that only 49% of the deliveries had been made and a full 33% of people had no update on their delivery status.
The same data agency has also shown that sales of the Apple Watch have been decreasing since opening weekend and that now, only three months into the product’s life cycle, sales are down 90%. Google (GOOG) searches for the Apple Watch also show that interest has been waning. The main theories as to why sales are so low are that the product isn’t widely accessible and that low sales for new Apple products are normal.
Furthermore, Apple has not released sales figures about their Apple Watch – a move which has led the public to speculate that the product is a failure for the company. Apple has also said that its Apple Watch sales will not be reported separately in its Q3 earnings release but that they would be bundled together with revenue from Apple TVs, iPods and Beats products.
Why Aren’t People Buying Apple Watches?
Apple Watches don’t fill a consumer need. iPods let consumers carry hundreds of CDs worth of songs in their pocket. iPhones let consumers call people while checking their email, listening to music and downloading movies. The Apple Watch allows people to talk to Siri without using their iPhone, it lets people check the time without using their iPhone, and it replaces fitness bands with a bigger and more expensive device. In short, Apple Watch doesn’t revolutionize anything, nor does it seem well-priced for its functionality.
What’s more, while Apple may have a large share of the market in the US, it does not have majority market share in the rest of the world. In 2014, Android devices captured 5.5 times the market that iPhones did and data is showing that iPhone usage is slipping worldwide. The Apple Watch is one of the most expensive wearables on the market and is only useable with an expensive and increasingly unpopular cell phone.
The Bottom Line
In the US, where iPhones are status symbols and cheaply available on two-year contracts, Apple iOS has captured 31% of the market. When people already have iPhones, the cost of an Apple Watch is less onerous than for someone who is currently using an Android device. With the Apple Watch now available for in-store purchase American sales are likely to improve. Internationally though, the Apple Watch will be just another wearable, albeit with a hefty price tag.
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