Market Insight

Apple Watch Success Is Critical for the Success of the Smartwatch market

April 23, 2015


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The Apple Watch is initially available in just the US, UK, Australia, Canada, China, France, Germany, Hong Kong and Japan. The Apple Watch has been up for pre-order online since April 10, with initial units arriving on 24 April. But for orders placed now, delivery dates reach into the summer.

The Apple Watch will come in two sizes (38mm and 42mm), three versions (Apple Watch Sport, Apple Watch, and Apple Watch Edition), and two colours per version for a total of 12 variants. Prices for the Apple Watch will range from $349 for the 38mm Sport model, to $549-$1099 for the stainless steel model, to $10,000-$17,000 for the gold and rose gold ‘Edition’ model.

Our analysis:

One of the main issues that Apple will face with the Apple Watch will be ensuring the correct inventory is in the correct physical locations. Apple's launch approach with Apple Watch is unusual: With a total of 12 variants just for the Watch, and whole range of bands, the permutations are large, especially for an Apple product.

By opening up pre-orders for the Apple Watch on April 10th and offering 15 minute preview appointments in its shops, Apple is taking a new launch approach to manage this issue. The 15 minute appointments allowed consumers some time to try on the range of designs and decide which they like most, and by offering pre-orders consumers can then return home and pre-order their Apple Watch online. This means that Apple can assemble the pre-ordered smartwatch at a central point and send to precisely where they are needed, without the need for speculative distribution of specific models to its physical locations.

Despite this initial managed launch approach, IHS expects the Apple Watch will be the best selling smartwatch of 2015. IHS forecasts Apple will ship over 19 million units in 2015, giving it a 56% market share of smartwatch shipments in 2015. Over time, IHS expects its rivals to catch up, with Apple’s market share dropping to 38% by 2020.

While the Apple Watch will be available to physically purchase now, it will only be available at selected third party locations, and even those have indicated low availability. In part, this is because these third party retail locations are focused on the extreme luxury end of the market. Dover Street Market for example confirmed that it will stock less than 1000 watches combined at both London and Tokyo branches. The locations selected are all high-end luxurious establishments, and demonstrate the beginning of Apple’s entry into the fashion market. Apple has identified the importance of the look and style of a smartwatch and approval from leading fashion names will be fundamental to its success.

The Apple Watch launch will have a critical effect on the fate of the overall smartwatch market. The marketing and buzz created by the Apple Watch will have a positive impact on the smartwatch market as a whole. To date, despite Samsung, LG’s and others’ best efforts, only just over 5.5 million smartwatches have shipped worldwide. But following Apple's market entry, which will increase consumer awareness of smartwatches 2015, the smartwatch market will grow over six fold. 

 

Organization
Apple Inc.
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