Apple has a long and storied history of market disruption which dates all the way back to the original Apple computers in the late 1970s. Time and again Apple has entered a product market segment to the peril of the segment’s market leaders.
Then along came the Mac with a point and click user interface, which eventually beget Windows’ dominance in PCs. Apple reshaped the retail landscape with hundreds of its own, highly successful stores. Wait. There’s more. Much more. And a new one.
History Repeats Itself
Seldom has Apple been the first to market with an industry changing product. There were PCs before Apple. There were retail stores selling technology long before Apple Store. There were media players before the iPod
You get the idea, right? Apple may innovate specific components to create a new product, but usually is not the first to market. Since the turn of the century Apple has disrupted one technology market after another.
iPod, iTunes Music Store, iPhone, iPad, and now Watch. Wait. Watch? Isn’t the Watch a dud? A spectacular failure? Jonny Ive’s Newton?
Uh, no. Watch may be Apple’s most unique product ever, but it’s not really a new product or a new product line in the traditional Mac, iPod, iPhone, iPad sense. Watch is an accessory. If you must have an iPhone to use Watch, then Watch is an accessory to iPhone.
Apple has yet to say how many Watch models have been sold and with good reason. iPhones sell in such large numbers than any accessory will be dwarfed by the 600-pound gorilla in the room. Apple is disciplined and will let the market mature, continue to improve Watch and let the buyers help sell the accessory.
Some estimates say Apple Watch has sold about 5-million units since launch, and even Apple acknowledges that sales are accelerating as Watch is rolled out to more retail outlets and countries. That’s Apple’s methodology. Watch industry watchers point out that most of the revenue and profits for watch sales fall into the luxury category, specifically watches which cost $400 or more. Apple’s Watch starts at $350, and except for the gold Edition model, tops out around $1,000 or so.
What impact has Watch had on the traditional watch industry?
People who count such things point out what should have been anticipated since Watch was announced and launched. U.S. retailers sold less than $400-million watches in June, a 14-percent decline and the largest drop since 2008 (when the economy fell apart).
That means that in total revenue Apple’s Watch dominates the traditional watch industry in revenue, not just the nascent smartwatch segment. An even larger decline occurred in the watch segment below $200. Apple’s Watch is priced perfectly to attract buyers from the lower priced segment and the luxury segment at the same time.
The Swiss watch industry makes up about $50-billion in annual sales, and much of that from two distinct segments; the $400 to $1,000 watch, and the luxury segment beyond $1,000. Those who research such data estimate the U.S. watch industry sold less than 1-million watches in June, 2015, or roughly the same as estimates for Apple Watch, which sold at higher price points. Again, almost overnight, Apple has become a major disruptor to a mature industry, by taking over a rapidly growing segment; the smartwatch.
Here’s my prediction.
Watch sales will continue to accelerate through the end of 2015 as Apple expands distribution to more countries, and more retail outlets in those countries. At the same time, Watch will benefit from watchOS 2.0, native Watch applications, and the traditional holiday shopping season. As the year goes on, we’ll see more negative impact to the traditional watch industry, especially the $400 to $1,000 market segment dominated by Swiss manufacturers.
Boom! Apple did it again.