Apple, Inc.’s (AAPL) Apple Watch sprinted out the gate with roughly 900k units sold via preorders, but word of supply shortfall quickly spread. Particularly telling, Apple froze the preorders relatively quickly and made it clear that while the smartwatch would be able to test at select retail sites in a handful of countries, it would not be available for sale in store.
Thus the Apple Watch missed the typical “waiting in line” hype that surrounds most of the company’s product launches. And in the absence of hype cynicism grew.
But finally, Apple has announced that it will be reopening ordering, both in-stores and online. The only catch is that the stores themselves don’t have stocks of the Watch, so you’ll have to wait an indefinite period to be delivered. That said, the fact that Apple is thawing the order process suggest confidence that its supply chain will deliver in (relatively) timely fashion.
Apple stores are now able to take Apple Watch orders. [Image Source: Corbis]
Apple also announced that on June 26 it will add seven additional countries…
… to the list of regions where the Apple Watch is available for order online and in stores. The additions will bring the total countries with access to the wearable to 16 (or 15 if you count Hong Kong as being part of China).
The device is also expanding to Apple stores in seven additional countries.
[Image Source: Jefferson Graham]
Senior Vice President (SVP) of operations, Jeff Williams, on Wednesday that his firm is making progress in dealing with the Apple Watch’s supply woes. After voicing frustration last month over lower than hoped sales, this time he struck a more optimistic tone, commenting in a press release:
The response to Apple Watch has surpassed our expectations in every way, and we are thrilled to bring it to more customers around the world. We’re also making great progress with the backlog of Apple Watch orders, and we thank our customers for their patience. All orders placed through May, with the sole exception of Apple Watch 42 mm Space Black Stainless Steel with Space Black Link Bracelet, will ship to customers within two weeks. At that time, we’ll also begin selling some models in our Apple Retail Stores.
With availabiliy reopen, there’s also interesting news to report on the volume front. Slice Intelligence, a market research with a high tech focus, offered up fresh estimates of how many Apple Watches had been shipped and sold to date.
This latest update from Slice Intelligence comes after a more dreary mid-May update that declared the only roughly half (48 percent) of Apple Watch preorders had received their product, and that a third (33 percent) had not received an estimated ship date.
Nearly two months into its sales run, Slice Intelligence reports in numbers shared with Reuters that the pace is picking up slightly, with 2.79 million units sold to date.
Slice Intelligence came to that estimate by using its proven methodology of looking at its 2 million consumer subscribers email receipts. Of that “slice” of customers, 20k had bought an Apple Watch, data that Slice Intel. used to extrapolate sales of roughly 2.8 million units. That’s a pretty incredible figure, if accurate as over all of 2014, Android smartwatches sold only 720k units, according to research estimates.
Also good news for Apple, Slice Intel. estimates that 17 percent of buyers purchased one or more additional bands. That’s over 500,000 cash-paying customers. This is particularly good news as the profit margin on the bands is typically much higher as they’re priced relatively expensively and have no electronics costs.
[Image Source: Reuters/Slice Intel]
According to market research firm IHS, the fluoroelastomer “Sports Band” which comes in a variety of bright colors, costs a mere $2.05 USD to make (per unit), but retails for $49. That figure does not include any sort of materials R&D, shipping, or packaging costs Kevin Keller, the analyst who prepared that estimate, notes. Still Apple’s profit margin even after those costs is likely something rarely seen in the electronics industry — likely in the range of 65-85 percent. The most popular color of the Sports Band, when it came to a second band purchase, was black.
The black sports band (left) ($49 USD) and the Milanese loop band ($149 USD) (right)
The Milanese Loop, a stainless steel band, is the second most popular choice for a second band purchase. Given that the most popular third-party imitation brands (using the same materials, for the most part) are retailing for around $35 USD (w/ free shipping) from online retailers like Amazon.com, Inc. (AMZN), it is reasonable to estimate that at most the developmnt, raw material, production, and shipping costs are likely to be somewhere in the $15-25 USD range. So Apple is likely see nearly as big a markup on that option as well.
Keller likens this favorable sales trend to the shaving product model, commenting:
Of course, because it’s Apple, it’s sell the razor, sell the blade.
If there’s one not so good piece of news for Apple, it’s that its smartwatch project appears unlikely to live up to analysts overly lofty figures.
[Image Source: Reuters]
KGI Securities, Taiwan’s second largest investment bank, said in a research note that it now expects July-Sept. sales of 5-6 million units, down 20-30 percent from its initial expectations. It’s now predicting sales of 15 million units in 2015. While that still seems a bit too high in my estimation, it’s a big drop from the 20-30 million units the investment firm was previously forecasting. Last month Avi Silver — an analyst at Asia’s top independent brokerage CLSA — dropped his estimate of 2015 Apple Watch sales from 20.5 million units to 16 million.
One analyst that does remain bullish is Katy Huberty of Morgan Stanley (MS). She actually raised her estimates on a basis of what she says is rising demand for the device and faith that Apple will clear up supply chain issues. She commented in May:
US Apple Watch demand increased around 60 percent since March. Importantly, Apple enjoyed the biggest increase in Watch purchase intentions post making the product available in mid-April. While the survey data extrapolates to 50 million annual Watch demand, we see this as a bull case given supply limitations.
She see the most probable case as 36 million units sold in the first year — an estimate that assumes a whopping 20 million more units sold in a period just four months longer than KGI Securities and CLSA’s 2015 estimates (roughly 8 month estimates).
The good news for her estimate, though, is that it appears that the supply is starting to increase. Now all that remains is the true demand.
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