Apple Watch’s First Sales Quarter

Key Impressions As Time is Called On The Apple Watch’s First Sales Quarter

Smart watches are expected to spearhead consumer adoption of wearable tech and given the Apple Watch is estimated to account for a 40% share of the smart watch market this year, there’s a lot riding on the success of the Apple device. Apple is soon to issue its quarterly figures featuring the first officially revealed Apple Watch sales data, but won’t split it out entirely. Specifically, while there will be specific iPhone sales and revenues, the watch sales will be bundled under ‘other products’, which last year came to USD1.7bn and included figures for items such as the Apple TV, Beats headphones and sundry other other devices.

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Why The Caution?

Is Apple being coy because the device’s figures aren’t as positive as it’d like? It may just be being careful. Cutting-edge devices like the Apple Watch tend to rely on building up a base of tech-savvy, early adopters in order to reach a critical mass before they can explode into a wider market. Having only been on sale for Q2, Apple may well be at this point, and doesn’t want to scare off high-street investors by announcing figures that still represent an early stage in the commercial evolution of the device, particularly with the amount of hype surrounding it.

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Initial Estimates

Canalys estimates that Apple has shipped around 4.2m devices in the quarter, despite hold-ups at its manufacturing bases in Taiwan, due to Apple pushing for devices just as workers went on leave for Chinese New Year. Business Insider, meanwhile, using data taken from Stifel surveys, estimates the Apple Watch has generated around USD1.7bn, based on 3.3m sales at USD500 per item since launch. There is a school of thought that there was an initial rush of sales around launch time, followed by diminishing sales as the quarter progressed. Using receipt and invoice data gathered from email inboxes, Slice research suggests Apple sold around 1.3m units on launch day, but by July 1 that number had reduced to a trickle of just 2,500 units. It certainly makes for a dramatic graph.

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Satisfied Customers

This drop-off can be explained in a number of ways. Perhaps sales just very quickly plateaued in key demographics such as the early adopters. Perhaps the supply line scares gave the wrong impression to customers. Perhaps customer satisfaction with the device isn’t as high as expected. However, a recent survey by Techpinions doesn’t bear the latter point out. In its survey, the firm found that, contrary to what some (speculative) sales estimates are suggesting, user satisfaction is high. Very high. At 97%, higher, in fact, than Techpinions’ figures for the initial launches of the iPad (91%) and the original  iPhone (92% – although no sample size is cited for this figure, so discretion is suggested), both of which are now, it goes without saying, runaway successes (although the iPad too is perhaps now hitting its own plateau). What’s more, the majority of those surveyed were not the predicted early adopters, but casual, non-tech-savvy consumers. Even more strikingly, whilst all groups surveyed were largely positive about the product, it was these ordinary, non-specialist consumers were more likely to say they were ‘very satisfied’ (73%) with the product, than merely ‘satisfied’. By comparison, the least impressed group were professional techies, such as app developers, of whom only 43% were ‘very satisfied’. Again, this is just one survey, of a pool of 1,000 users, so it’s important not to read too much into these figures. Nevertheless, it muddies the water about just what exactly is going on with Apple’s device – although with software development still at a relatively early stage, and with a game-changing app yet to appear (and it is encouraging that app developers, while the least ecstatic, were the only group surveyed of whom none described themselves as ‘disappointed’), there seems to be everything still to play for – and more importantly, people willing to play.

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Still iPhone-Centric

In either case, neither Horophiles nor die-hard Apple reactionaries should be overly concerned about what the figures portend. The iPhone is still by far the company’ single most financially important product, accounting for around 69% of its overall revenue. It’s enjoying an exemplary year, with a predicted 40% quarterly growth. For a company that already has around 18% of the global market share, for a vertically integrated, high-end device, this is a seriously impressive figure (Android has much larger share as a mobile OS, but then it’s spread over a number of third party devices). What’s more, with the smartphone markets in India and Latin America set to explode (India in particular is set to overtake the US in number of smartphone users by 2017, becoming the world number 2 after China), there is enormous potential for growth in this already massive sector. All this means that, even if the watch doesn’t perform as well as hoped, it’s a blow Apple can take standing up as it builds its product and its market.