Thursday, March 12, 2015

Apple Watch sales expectations - UPDATED 1

I’ve revised my thoughts on how Apple Watch will sell.  My initial thoughts were that it would do okay but people would hold out for a next generation.  I think this is largely right but that I ignored a second set of buyers and so ended up underestimating sales for the first generation.  For many buyers, they will see the limited set of apps, unknown use-case, etc. and so defer.  However, I think a second set of buyers will snap this up – gift givers for whom these issues really aren't that important (because they don't need to use the watch).

There hasn’t really been an easy Apple gift for a while.  iPods and then iPads fit the bill as a gift but both markets saturated pretty quickly; how many of each can someone really use – especially as there weren’t big changes after a while?  iPhones are a tough gift as they either impose a subscription obligation or have a very high price tag (two years of service as part of the gift?).  Looking at Apple Watch, the wide price points make it a perfect “Dads and Grads” type gift and one that has more cultural resonance than iPods or iPads ever did.  As a luxury/signifier gift, the limited and uncertain functionality should not be a handicap.  Watches remain a common commemorative/notable gift and they are clearly not selected for functionality or practicality.

As a result, I suspect May and June sales are going to be far higher than expected at launch and that we will see unbelievable holiday sales in 2015 and 2016 (assuming a thinner version is launched in time for holiday 2016).  I'm going to guess 6 to 10m watches in May + June (and one week of April) but that 80% will be small Sports for a $400 average selling price.

UPDATE: Given the substantially delayed shipping times, I think a lot of potential gift givers will fall away as the shipping dates will miss graduation.  At the same time, the heavy load on the online store (which can handle probably 4m sales based on iPhone releases) suggests that there was a LOT of demand.  The store regularly crashed for me when checking order status (placing the order was fine though).  Finally, the significant shipping delays suggest there won't be much supply (if any) on hand in stores, further reducing sales.  So I think we are at the low end of 6m for the first quarter of release but only because of constrained supply.

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