mac­for­mat in­vest igat es

Tech pun­dits say the Ap­ple Watch is a flop, but Ap­ple begs to dif­fer – so who’s telling the truth?

Mac Format - - NEWS - writt en by ALEX BLAKE

Clock­ing up the suc­cess of the Ap­ple Watch

Read al­most any tech web­site’s cov­er­age of the Ap­ple Watch and a fa­mil­iar story emerges.

It’s a fail­ure. No one wants to buy one. It was a huge mis­take on Ap­ple’s part, a gam­ble that hasn’t paid off and should sim­ply be shelved. You get the idea. This nar­ra­tive is per­sis­tent and near-uni­ver­sal. But is it true? We de­cided to take a look at the num­bers to see whether the Ap­ple Watch re­ally is in a slump, and what can be done by Ap­ple if it is.

It’s not hard to see why peo­ple might think the Ap­ple Watch is strug­gling – al­most the en­tire wrist wear­able in­dus­try is still try­ing to find its feet. For­mer gi­ants are fall­ing left, right and cen­tre. In 2014, Nike aban­doned its FuelBand wear­able. Jaw­bone is go­ing out of busi­ness. Sam­sung and LG have given up. Even Peb­ble, which more or less kicked off the en­tire smart­watch craze, has been bought by Fit­bit af­ter in­cur­ring huge debts. Right now, this is an in­dus­try that may be best de­scribed as ‘chaotic’.

So why have these com­pa­nies strug­gled so much in an in­dus­try that was once seen by many as a potential gold­mine? Well, it may be a clas­sic ex­am­ple of the Gartner hype cy­cle, named for the mar­ket re­search firm that first pro­posed it. The cy­cle de­scribes the hype that sur­rounds new tech­nol­ogy. First comes the peak of in­flated ex­pec­ta­tions, soon fol­lowed by the trough of dis­il­lu­sion­ment as a num­ber of play­ers fal­ter and col­lapse. Then comes the slope of en­light­en­ment and, even­tu­ally, the plateau of pro­duc­tiv­ity. It is likely that the hype peak drew in com­pa­nies that sim­ply weren’t able to com­pete, and have failed as a re­sult. Ap­ple though? That’s a dif­fer­ent story.

A dif­fer­ent ap­proach

In con­trast to so many wear­able com­pa­nies that have fallen by the way­side, Ap­ple has ac­tu­ally been very suc­cess­ful with the Watch. A lot of that is to do with the very dif­fer­ent way Ap­ple views fit­ness data, and the way it con­vinces peo­ple to get fit and stay that way. Jay Blah­nik, Ap­ple’s di­rec­tor of fit­ness and health, summed up Ap­ple’s ap­proach like this: “Let’s not try to make this about the most you can do, let’s save that for the Work­out app. This is not about the most you can do, but the least you should do ev­ery day.” Put another way, if you want peo­ple to get fit, they need achiev­able goals. There’s a pop­u­lar fit­ness adage that you should walk 10,000 steps a day. Blah­nik dis­agrees: “What a lot of peo­ple don’t re­alise is the av­er­age Amer­i­can does 2,500 to 3,500 steps per day,” he says. “So 10,000 is four times the amount the

av­er­age per­son does, which is why it’s re­ally hard. And when it’s re­ally hard for you to do, there is go­ing to be burnout.” Pre­vent­ing that burnout by set­ting goals that are only a slight amount above what users have al­ready achieved is what keeps wear­ers com­ing back.

Another in­ter­est­ing in­sight comes from Rachel Kal­mar, a fel­low at the Berk­man Klein Cen­ter for In­ter­net & So­ci­ety at Har­vard Uni­ver­sity. She ex­plains that wear­ables are like flour mills. “Though some con­sumers have ideas of things they’d like to bake, most don’t want flour, they want cook­ies,” she says. “The same is true for data: most peo­ple don’t want the data it­self, they want cook­ies: the use­ful prod­ucts and ser­vices that are built with this data.” Now com­pare that to what Blah­nik says about the Watch: “Typ­i­cal ac­tiv­ity track­ers also mea­sure met­rics but they tend to do them in num­bers. We’ve built our en­tire de­sign around a vis­ual. Well, what’s in­ter­est­ing about a vis­ual is num­bers con­tinue to get big­ger. No mat­ter how big they are, they can al­ways be big­ger. But a ring is ei­ther closed or not closed. So we’ve found there’s a real ad­dic­tive be­hav­iour in mak­ing sure that fi­nal ring gets closed.”

Fit­ness first

By tak­ing away the raw num­bers, Ap­ple has been able to sim­plify the process of get­ting peo­ple fit, while at the same time be­ing able to cus­tomise it to ev­ery user, thereby mak­ing it

more ap­proach­able. Blah­nik says the goal was to make fit­ness a ‘rit­ual’ like brush­ing your teeth – some­thing you don’t even think about. By fo­cus­ing on the num­bers, other wear­ables have sim­ply scared users away.

This em­pha­sis on fit­ness is likely to be one of the main rea­sons for the Watch’s suc­cess. Think about the Ap­ple Watch launch. You could buy the wear­able at high-end fash­ion bou­tiques, but you couldn’t just walk into an Ap­ple Store and buy one. And, with its lofty £10,000 price tag, the Ap­ple Watch Edi­tion clearly was not aimed at fit­ness fa­nat­ics.

That’s all changed. The se­cond ver­sion of the Ap­ple Watch Edi­tion starts at a much more rea­son­able £1,299, min­imis­ing the push for high-end fash­ion ac­cep­tance. In its place is a re­newed fo­cus on fit­ness. The Ap­ple Watch Se­ries 2 added wa­ter re­sis­tance, GPS func­tion­al­ity and a part­ner­ship with Nike. The slo­gan on the Watch’s online store page reads ‘Choose the Ap­ple Watch that moves you.’ It all points to the idea that Ap­ple has ac­cepted that the Watch’s best chance of suc­cess lies in health and fit­ness.

That’s re­flected in the Watch’s sales per­for­mance. Ac­cord­ing to Strat­egy An­a­lyt­ics, Ap­ple sold 2.8 mil­lion Ap­ple Watches in Q2 2017, up 56% from Q2 2016. The firm has pre­vi­ously re­ported that Ap­ple sold 13.6 mil­lion Watches in 2015, 11.6 mil­lion in 2016 and 3.5 mil­lion in Q1 2017, mean­ing the com­pany has sup­pos­edly sold over 30 mil­lion units so far. Not bad for a prod­uct that tech writ­ers are claim­ing has failed.

Here are some more num­bers at­test­ing to the Watch’s suc­cess. Tim Cook says Watch sales fig­ures are up 50% on last year. Mar­ket analysis firm Canalys es­ti­mates that Ap­ple in­creased Watch ship­ments to stores by 77% year-on-year in Q1 2017. In fact, that 77% helped the en­tire in­dus­try grow 25%, show­ing how much trou­ble other wear­able com­pa­nies were in dur­ing the first quar­ter of 2017. And Canalys has also re­ported that Ap­ple took a whop­ping 80% of smart­watch rev­enues in Q4 2016. Of course, with­out any solid num­bers from Ap­ple, these fig­ures should be taken with a pinch of salt. But Tim Cook’s words on soar­ing Watch sales go a long way, so the fact that these lat­est num­bers agree with him sug­gests they’re not too far off the mark.


So why did the pun­dits get it so wrong? A large part of the blame can be laid at the feet of a re­port from an­a­lyt­ics firm IDC, which

claimed in De­cem­ber 2016 that the Ap­ple Watch’s ‘growth’ (if you can call it that) stood at an eye-wa­ter­ing -71%. Yes, mi­nus 71%.

Un­for­tu­nately for IDC, it got the num­bers wrong. A day af­ter the re­lease of IDC’s re­port, Tim Cook told Reuters that “Sales growth is off the charts” for the Ap­ple Watch. He then con­tin­ued: “In fact, dur­ing the first week of hol­i­day shop­ping, our sell-through of Ap­ple Watch was greater than any week in the prod­uct’s his­tory. And as we ex­pected, we’re on track for the best quar­ter ever for Ap­ple Watch.” Fight­ing talk, in­deed.

Writ­ing for tech­nol­ogy web­site The Memo, pun­dit Oliver Smith re­cently ar­gued that the rea­son the tech world mis­judged the Watch is that it had a ‘dif­fi­cult birth’, in his words. “Ap­ple made three gen­uine mis­steps; the Watch was over­priced, too fo­cused on apps rather than fit­ness and no­ti­fi­ca­tions, and aimed at break­ing into the world of high fash­ion rather than mass mar­ket,” he wrote in early Au­gust 2017. But by Septem­ber 2016, he ar­gued, Ap­ple had fixed all of those is­sues.

Ap­ple doesn’t al­ways get launches right. For ev­ery iPhone and Ap­ple II, along comes a New­ton Mes­sagePad – a prod­uct that doesn’t get it right at launch, and has to be re­fined down the line (al­though we doubt the Watch will be killed off as un­cer­e­mo­ni­ously as the New­ton was). The point is that the Watch has found its niche as a fit­ness wear­able, not a fash­ion ac­ces­sory. Now that Ap­ple seems to have re­alised this, the sales are flood­ing in.

Watch this space

So what’s next for the Watch? Well, de­spite its ap­par­ent suc­cess, Ap­ple still isn’t the num­ber one fit­ness wear­able com­pany if you in­clude sport bands – that hon­our goes to Xiaomi, with Fit­bit in se­cond place and Ap­ple not too far be­hind. Strat­egy An­a­lyt­ics pegs Xiaomi’s wear­able ship­ments at 3.7 mil­lion units in Q2 2017, with Fit­bit at 3.4 mil­lion and Ap­ple shipping 2.8 mil­lion. But given Tim Cook’s bullish out­look on the Watch, it may not be long be­fore it claws its way to the top spot. It should also be re­mem­bered that much of both Xiaomi and Fit­bit’s suc­cess comes from sales of their en­try-level fit­ness bands, a mar­ket that Ap­ple has thus far sought to avoid.

Ap­ple won’t be re­leas­ing a fit­ness band any time soon – it’s quite con­tent of­fer­ing a higher-end smart­watch. That ap­proach has served it well so far, if Tim Cook’s state­ments are any­thing to go by. They also un­der­line the risk that comes with try­ing to se­cond-guess Watch sales fig­ures when Ap­ple keeps them well hid­den. But like it or not, the Watch is here to stay – and it’s do­ing just fine.

A vast amount of hype sur­rounded the Ap­ple Watch when it was first re­leased.

Each Ap­ple Watch can be per­son­alised with a wide range of straps.

While other fit­ness track­ers fo­cus on the num­bers, the Ap­ple Watch takes a more vis­ual ap­proach to feed­back.

Ap­ple made a good move by ditch­ing its ‘bling’ model and drop­ping the prices of other op­tions.

The se­cond gen­er­a­tion Ap­ple Watch added wa­ter re­sis­tance and GPS func­tion­al­ity.

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