Market Insight

Apple extends Apple Watch retail presence with Best Buy deal

July 29, 2015


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US retailer Best Buy will sell the Apple Watch in 100 stores starting from August 7th. It will become the first national US retailer to stock the Apple Watch.

It will stock the Apple Watch in an additional 200 stores by the holiday season this year.

Best Buy will stock the Apple Watch and the Apple Watch Sport, as well as accessories including straps, screen shields, and chargers.

Our analysis:

Allowing Best Buy to stock the Apple Watch could expand Apple’s footprint to over 1200 retail locations. Best Buy has over 1000 stores in the United States, which is more than Apple’s 267 shops.. The initial agreement however only includes 300 stores in 2015. As a highly personal product with many strap options, potential customers will want to try it on before purchasing. Previously, with iPhones or iPads which have only 3 colour variants and were established in their respective sectors this was less important. Best Buy stocking the Apple Watch is another way for Apple to limit inventory challenges that are associated with the permutation of Apple Watches and straps.

This is not the first time Apple has allowed a third party retailer to sell the Apple Watch. High end fashion retailers, such as Dover Street Market, sold the Apple Watch on launch day, although those shops were aimed at affluent consumers who were more likely to purchase the Apple Watch Edition, and had very limited stock. This is also not the first time that Apple products are sold in Best Buy. Macs, iPads and iPhones are all available for purchase in Best Buy’s around the US.

This move by Apple also indicates that its supply is catching up with demand. It was not until two months after the official launch that Apple actually sold the Apple Watch in its own retail stores  in selected Apple Watch launch countries. In addition to the Best Buy announcement, Apple has expanded its Apple Watch footprint to Turkey.

The Best Buy agreement will pit the Apple Watch against its competitors side by side. This is unlikely to have much initial impact on smartwatches from Android smartphone makers such as Samsung and LG because Apple Watch is only compatible with iPhones. But it may impact smartwatches such as Pebble which are compatible with iPhone. Previous versions of the Pebble were significantly cheaper than the Apple Watch’s, but Pebble has increased its prices with each version bringing its top range Pebble Time Steel model within $50 of the cheapest Apple Watch.

The agreement to sell Apple Watches through Best Buy also highlights the distinction between the Apple Watch models. Both the Apple Watch and the Apple Watch Sport, which will be sold in Best Buy, are priced close to electronic gadgets, rather than premium jewellery. The Apple Watch Edition, although it performs the same functions, is unlikely to be sold in Best Buy or other general electronics shops and is intended as a fashion accessory.

Best Buy has an international presence in countries including Mexico, and China. In contrast, Apple does not have such an extensive presence outside the United States, and the Best Buy group could help Apple put the Apple Watch within reach of consumers from those countries, discouraging grey imports. 

 

Geography
USA
Organization
Apple Inc. Best Buy
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