After two months of online sales, Apple began selling Watches in its Retail Stores this week. According to analysts, accessories will be very profitable.
Two months into the Apple Watch era, Apple may finally be reaching supply-demand balance. The company, which has thus far only offered the Apple Watch through its online store (and a few select luxury retailers), is now selling the Watch in its Retail Stores.
As CEO Tim Cook frequently notes, it's impossible to determine the true demand for a product until there's enough supply to go around. Now that most versions of the Watch are available to ship (in the US at least) in 1-2 weeks, we may finally get to see what demand is--or, more accurately, Apple will get to see what demand is.
We don't know if Apple will break out Apple Watch sales in its quarterly earnings reports like it does for the iPhone, iPad, and Mac--and the company recently stopped disclosing total iPod sales after years of negative growth in the category.
But we do have a few numbers to work from. Reuters reports on estimates from Slice Intelligence, a company that examines email receipts, that Apple has sold roughly 2.8 million Apple Watches so far. Apple hasn't issued a triumphant press release touting sales as it has for other product launches in the past, leading some analysts to assume poor sales of the device--while others (including hints from Tim Cook) have blamed production problems for the lack of sales.
Either way, Apple will be launching in more countries over the next few weeks, and it may be making money from more than just Watch sales. Unlike with the iPhone and iPad, where there's a vibrant third-party case market, Apple is currently the only company making bands for the Apple Watch (Apple has released guidelines for third-party band makers, but none have hit shelves yet).
Slice says 17% of Apple Watch buyers picked up more than one band, with the $150 Milanese Loop band the second-most popular second band after the black Sport band (which is the most popular primary and extra band, according to the firm). It's likely that Apple, with its huge economies of scale, is racking up significant profits from the sales of these extra bands, which likely carry handsome profit margins.
One estimate claimed the material cost of the Sport Band was just a few dollars, but Apple is selling the colorful flouroelastomer product for $50.
Even so, the band and Watch sales are unlikely to make a huge dent in Apple's bottom line--if we estimate $550 as an average selling price (a rough, educated guess on my part), that would be a little more than $1.5 billion in revenue from Watches alone. That's in two months.
But in the past six months, Apple has averaged some $3.5 billion per week in iPhone revenue alone--not including everything else the company sells. It will likely be years before the Apple Watch accounts for much more than an iPhone accessory--like the extra bands are for the Watch--at least as far as Apple's sales numbers are concerned.
Still, it's a nice business to be in. Did you, or are you planning to purchase extra Apple or third-party Watch bands? Would extra bands have any impact on your purchase of the Watch? Let us know your thoughts in the comments below.
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