HERE’S WHY THE AP­PLE WATCH IS A QUIET SUC­CESS

You might want to re­think your po­si­tion if you still think the Ap­ple Watch is a op.

HWM (Singapore) - - THINK - By Kenny Yeo

There are some who still think of the Ap­ple Watch as a fail­ure, and that Ap­ple’s re­fusal to share sales num­bers con­firm that. How­ever, there is over­whelm­ing ev­i­dence to sug­gest that the Ap­ple Watch has been a sleeper hit.

While Ap­ple hasn’t re­vealed ex­act shares num­bers, they have shared some stats and we have man­aged to learn much from them. Dur­ing the Ap­ple Watch Se­ries 3 an­nounce­ment, Ap­ple CEO Tim Cook re­vealed that Ap­ple has sur­passed Rolex in terms of sales to be the num­ber one watch brand in the world. Fur­ther­more, Cook also men­tioned that in Q2 2017, the growth of Ap­ple Watch was up 50% year-over-year.

Ear­lier this year, Cook boasted that de­mand for the Ap­ple Watch was so strong dur­ing the hol­i­day quar­ter than Ap­ple couldn’t make enough Ap­ple Watches.

Mar­ket re­search rm Canalys es­ti­mated that Ap­ple sold around 6 mil­lion watches dur­ing the hol­i­day sea­son and that gen­er­ated over US$2.6 bil­lion in rev­enue for the com­pany. This would amount to nearly 80% of the smart­watch mar­ket for that par­tic­u­lar quar­ter.

An­other mar­ket re­search rm, Strat­egy An­a­lyt­ics, es­ti­mated that Ap­ple shipped around 11.6 mil­lion watches for the whole of 2016, putting them com­fort­ably in rst place as the best-sell­ing smart­watch. They also be­lieve that Ap­ple has a smart­watch mar­ket share of around 55%, mak­ing them the run­away lead­ers in this cat­e­gory.

Com­par­ing sales of the Ap­ple Watch to Ap­ple’s other de­vices like the iPhone and iPad would be miss­ing the point. A watch isn’t a ne­ces­sity like a phone is. Heck, look around you, how many peo­ple even wear a watch these days?

For a more di­rect com­par­i­son, con­sider that the Ca­sio G-Shock, one of the most pop­u­lar watches in the world, only re­cently an­nounced that it has sold its 100 mil­lionth watch. In­ci­den­tally, 2017 also hap­pens to be the 35th an­niver­sary of the G-Shock. It took the G-Shock 35 years to hit 100 mil­lion. Ap­ple has al­ready sold more than 10 mil­lion watches in just over two years.

Ad­mit­tedly, for all of Ap­ple’s suc­cesses, the Swiss watch in­dus­try re­mains largely un­af­fected. You might have read about Swiss watch ex­ports dwin­dling, but this prob­lem is mostly a self-af­ficted one and not one caused by the Ap­ple Watch. In­ef­f­cient dis­tri­bu­tion, in­ef­fec­tive mar­ket­ing, a dis­con­nect in prices, and many other fac­tors, have caused many to ques­tion the value of plonk­ing down a cou­ple of thou­sands of dol­lars on a piece of metal, al­beit an exquisitely crafted one. The un­cer­tain eco­nomic cli­mate and global out­look don’t help.

The thing is, the Ap­ple Watch was never meant to com­pete against such watches. They might com­pete for the same real es­tate on your wrist, but the per­son who has been eye­ing a Rolex Sub­mariner or a vin­tage Patek Philippe ref. 2499 isn’t go­ing to stop just be­cause Ap­ple came out with a smart­watch. The al­lure of me­chan­i­cal watches is a whole other story best saved for an­other day.

Nev­er­the­less, the Ap­ple Watch has had a pro­found ef­fect on what watch in­sid­ers call fash­ion watches. The Texas-based Fos­sil Group is the undis­puted leader in this seg­ment. It makes watches for a stag­ger­ing 17 brands in to­tal, of which 6 are its own (Fos­sil, Sk­a­gen, and Zo­diac, just to name a few) and 11 are li­censed (Adi­das, Em­po­rio Ar­mani, Michael Kors, DKNY, Diesel, and more).

The day the rst gen­er­a­tion Ap­ple Watch went on sale on April 24, 2015, Fos­sil’s stocks were trad­ing at over US$80 apiece. Right now, at the time of writ­ing on the af­ter­noon of 9 Oc­to­ber 2017, it is just US$8.93.

Prior to the Ap­ple Watch, Fos­sil also en­joyed five years of record rev­enues. It racked in US$3.51 bil­lion in 2014. But in 2015, its rev­enue was down to US$3.2 bil­lion, and by the end of 2016, it was US$3.04 bil­lion. Prof­its have fallen even more dras­ti­cally. In 2014, the com­pany made US$377 mil­lion. It was US$220 mil­lion in 2015 and just US$79 mil­lion in 2016.

Fos­sil CEO Kosta Kart­so­tis ad­mit­ted as much and said: “The in­tro­duc­tion of tech­nol­ogy into wrist de­vices, tra­di­tional watches came un­der pres­sure and we were dis­ad­van­taged. We didn’t have the tech­nol­ogy ca­pa­bil­i­ties to com­pete with smart­watches, lead­ing to a de­cline in our mar­ket.”

Fos­sil is now dou­bling down on wear­ables and con­nected de­vices. At CES 2017 ear­lier this year, Fos­sil an­nounced a new range of smart­watches and con­nected de­vices and also said that it now has 300 wear­ables within its port­fo­lio of brands.

From the looks of things, Ap­ple seems to have nailed down the for­mula for its smart­watch. The lat­est Ap­ple Watch Se­ries 3 is faster than be­fore and now in­cludes cel­lu­lar con­nec­tiv­ity - a fea­ture that many users have yearned for since the rst Ap­ple Watch.

Ap­ple has also smartly de­cided to shift the fo­cus of the Ap­ple Watch to health and tness. If there’s one way to get peo­ple to wear a watch, it is to tell them that by wear­ing it you can be health­ier and that you can live longer.

watchOS 4, the lat­est op­er­at­ing sys­tem for the Ap­ple Watch, adds more de­tailed heart rate mon­i­tor­ing and can even de­tect if you have ir­reg­u­lar heart rates. It has im­proved work­out modes and GymKit, a new fea­ture that lets wear­ers sync their Ap­ple Watches with com­pat­i­ble gym equip­ment.

A long-term goal for the Ap­ple Watch is to en­able it to track your glu­cose lev­els us­ing non-in­va­sive meth­ods. In other words, users won’t have to prick them­selves to get a read­ing, which is typ­i­cally the only way know to get a re­li­able glu­cose level read­ing. If Ap­ple is suc­cess­ful, this would make the Ap­ple Watch an in­valu­able mon­i­tor for users with diabetes.

The take­away is this: the Ap­ple Watch might not have en­joyed the same level of suc­cess as the iPhone or iPad, but it is still an im­mensely prof­itable de­vice. More im­por­tantly, the Ap­ple Watch has a lot of prom­ise and I’m cer­tain that it will only grow in stature and im­por­tance for Ap­ple in the com­ing years.

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