Analyst: Apple Watch launch was 'botched'

[Chupa Chupa]

And then what happens next year? How does Apple make all those people upgrade?

By making a compelling update. It's what let 1st gen iPod, iPad, iPhone buyers to buy a 2nd gen. It's once a product matures that getting upgraders becomes an uphill race. I know I will upgrade to 2.0 if its as significant an upgrade as the iPad 2 was for the original iPad.

This assume the AW has gained traction by then, and if that is true then the buyers will be early-adopter upgraders + new buyers, and iPhone owners is a sizable pool where even a few % can be significant.

 

[Cuyler]

And then what happens next year? How does Apple make all those people upgrade? Let's say they add another 30 million watches next year between upgrades and new adopters ... That's only 60 million watches in two years. Those aren't even iPod numbers. And what if nobody else decides they need an Watch to go with their iPhone 7. Then so much for the next big thing from Apple.

How many do you need to sell to say it's a success? No product is going to be bigger than the iPhone.

However, look at the numbers. Let's say Apple only ever sells 60 million watches. Let's be conservative and say they only make $100 per watch. That's $6 billion. Sure, that's a small number for a company like Apple, but it's not a small number.

And Apple can't afford to not experiment with wearables. The cell phone form factor may change in the future — and if Apple wants to keep its edge it has too try new things even if some analysts call them flops. For instance, the Newton was a gigantic flop, but it was a forerunner to the iPhone and iPads — although the Apple Watch is no doubt going to do better than the Newton ever did.

 

[Kavier]

There are some logical flaws in this analysis but this part is true:



Rather than being able to sprint out of the launch gate, the AW is hobbling because of a self-induced injury. There is simply no way for Apple to capture impulsive purchases -- ordering for July is not impulsive. Plenty of time to consider the buy and cancel.

Any unbiased person has to recognize this launch has not be smooth; that Apple could have, should have, been much smoother given the very public, expensive lead up to the launch.

But I don't think the watch is a "flop." That is silly. A new product like this needs time to build traction, very much like the original iPod. And there is a positive to Apple having no stock -- more time to improve the firmware before major exposure to the non-geek public. Also more time for apps to develop.

I agree that not having the watch available to buy in the stores hasn't helped. I do see why it's not available though. I think there are simply too many combinations to be able to get the correct inventory of watches + band to each store. You'd end up with stores with tons of extra milanese loops for example while another store is completely out of milanese loops and angry customers would be complaining everywhere. I think Apple should have packaged each watch with a free black sports band and then just sold all the other bands as extras available online. That way, inventory could have been in the stores without trying to worry about how many of each band to stock at each location.

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How many do you need to sell to say it's a success? No product is going to be bigger than the iPhone.

I also think it erroneous to compare the adoption rate of a 5th and 6th gen phone to a 1st gen watch.

 

[mightyjabba]

The launch was botched -- simple as that. As more details become clear it's basically impossible to deny this. That doesn't mean the watch itself is going to be a flop, and I don't think it will be, but it doesn't exactly help.

 

[McDaddio]

That's only 60 million watches in two years. Those aren't even iPod numbers. .

So that is about 25B dollars in revenue in two years.
That is equivalent to:
- one Facebook, or
- 2.5 Yahoos
- 3/5ths of an eBay, or
- 1/5th of all of Google.

Oh the huge manatee!

 

[bluecow]

At this point in time, I'm guessing Apple as a company is far more concerned about the decline in interest in tablets then they are about the roll out of the watch. Much more money to be lost if tablets continue to slide and iPad demand craters.

 

[dexterbell]

So roughly 120 million iPhone 6's have been sold to date. If "only" 8.4 million or so Watches are sold..say the rest of this calendar year...how is that dismal?

Saying you are interested in a device and actually paying $400+ For said device are two very different things

 

[Cuyler]

The launch was botched -- simple as that. As more details become clear it's basically impossible to deny this. That doesn't mean the watch itself is going to be a flop, and I don't think it will be, but it doesn't exactly help.

I certainly agree with that. Whether they had manufacturing problems or underestimated demand, Apple did not have enough watches at launch. I can't help but think they wanted to sell watches in the stores on the 24th, but had to scale back sales.

I'm curious to see how soon this is corrected. After preorders began, it didn't take long until Apple would only guarantee a June delivery date. However, even if you order one today, Apple still says you get it June. Plus Tim Cook says they're aiming to open up sales in more countries at the end of June. So either they're confident that manufacturing will ramp up or demand has already subsided.

I talked with an Apple Store employee today, and he thought eventually Apple Stores will carry the sports watches eventually, but the stainless steel models will remain online sales only.

...
I also think it erroneous to compare the adoption rate of a 5th and 6th gen phone to a 1st gen watch.

That's a good point. But in any case, Apple would never expect to sell as many watches as iPhones. Any analyst that thinks they should needs to go back and analyze some more.

 

[JayMBP]

I think the note isn't too far out.

Ordered 2 AW (one 38 for wife and 42 for me) the minute sale opened, got them both within the week, but I decided to sell them to co-workers after using it for 3 days. (technically just 1 and half, as I forgot to wear it the second day and only remembered about it half way through the 3rd day)

Honestly, AW didn't have much else going on beyond ApplePay comparing to Android Wear. I stopped wearing watches after cellphone becomes an item in my life although we still have a few nice watches that we bought/given over the years since wife's a watch person. So it really needed to make that much of difference to get both of us wearing AW on a daily-basis. Sadly, it didn't.

We still take our phone out for time, read our messages on the phone when notification shows up on AW and although it was cool to pay our coffee with our AW, it wasn't all that useful. The full day that I actually wore it, I couldn't remember any single moment that I told myself, "this is really awesome" or even just "oh, life is so much easier now".

My wife... simply had it as a watch and hated the fact that it doesn't display time at all time; her words "if a watch cannot display time when I look at it, why call itself a watch?" It used to be that she can just glance on her wrist to get the time whenever she's in the line of sight of her wrist, now she actually needs to move her hand to get the time. Furthermore, the fact that she needs her phone when she goes to workout for the fitness program to work makes the another point (unifying her watch+tracker) of buying AW pointless.

It's too early to call AW a flop, but I think as of right now, it's simply a statement "hey I got the new Apple Watch!" rather than anything actually useful. Furthermore, as it was designed right now, I don't think it would make much difference when new apps comes along. It was not designed to provide us a new user experience, but rather a product experience. Something that I see Apple doing ever since Jobs left us and I absolutely hate that.

 

[largefarrva]

The launch was botched -- simple as that. As more details become clear it's basically impossible to deny this. That doesn't mean the watch itself is going to be a flop, and I don't think it will be, but it doesn't exactly help.

My thoughts exactly. No way can Apple call this launch a success.

At the same time, I don't think anyone can call the Apple watch a flop. At least not yet, but I don't think it will ever be considered a flop....just my opinion.

 

[wdfly]

i have to say i agree this launch has been a failure. they didn't have any link bracelet types on launch day and they still haven't launched a single one of them yet more or less proving that they didn't manufacture any of them prior to people ordering them. i hope this isn't a sign of things to come.

 

[largefarrva]

i have to say i agree this launch has been a failure. they didn't have any link bracelet types on launch day and they still haven't launched a single one of them yet more or less proving that they didn't manufacture any of them prior to people ordering them. i hope this isn't a sign of things to come.

Modern buckles and leather loops too. It appears none of them existed prior to launch either. So that covers about half of the band offerings...and none of them existed prior to launch. Very unlike Apple....someone dropped the ball. In a very bad way at that.

 

[thomasfxlt58]

It's too early to call AW a flop, but I think as of right now, it's simply a statement "hey I got the new Apple Watch!" rather than anything actually useful. Furthermore, as it was designed right now, I don't think it would make much difference when new apps comes along. It was not designed to provide us a new user experience, but rather a product experience. Something that I see Apple doing ever since Jobs left us and I absolutely hate that.

The Watch will be successful in spite of this disaster of execution on most every level. Let's face it, if your going to put a watch on your wrist, this category of wearables will get a big share of the market. Apple overcomes if they don't take customer loyalty for granted in the future and they stay the course with how they've become successful. I'm all for a fashionable Watch but it doesn't have to be a boutique item.

 

[largefarrva]

The Watch will be successful in spite of this disaster of execution on most every level. Let's face it, if your going to put a watch on your wrist, this category of wearables will get a big share of the market. Apple overcomes if they don't take customer loyalty for granted in the future and they stay the course with how they've become successful. I'm all for a fashionable Watch but it doesn't have to be a boutique item.

Key words in bold. Agreed.

 

[Azzin]

I've visited Apple Store couple times to tried on the watch and noticed that very few interested in Apple watch

Wow, what a great indicator of worldwide sales expectations.

Presumably you're not including the 2.3 million orders that are expected to ship by the end of May?

That's a sales sheet of $1.3 Billion-sounds like quite a bit of interest to me, but then I haven't gauged interest from your local Apple store.

 

[Tsuchiya]

It's safe to say that it has been botched, but it isn't a total bust. People are getting their Watches, and generally they seem OK.

That being said, Apple have had to change things up very quickly at the last minute (decision to postpone retail sales for example), and the fact that there aren't even service parts at the Genius Bar for replacements/repair (at least here in London) goes to show how tight things are.

Another month or so to overcome bottlenecks and get everything "set" would have been great. The trouble is that Apple hyped the **** out of the Watch for months, and a delay probably wasn't an option.

 

[Chupa Chupa]

I agree that not having the watch available to buy in the stores hasn't helped. I do see why it's not available though. I think there are simply too many combinations to be able to get the correct inventory of watches + band to each store. You'd end up with stores with tons of extra milanese loops for example while another store is completely out of milanese loops and angry customers would be complaining everywhere. I think Apple should have packaged each watch with a free black sports band and then just sold all the other bands as extras available online. That way, inventory could have been in the stores without trying to worry about how many of each band to stock at each location.

I don't see where multiple SKUs are a factor right now. After the defective sensor issue, Apple is just having a slow go of it making ANY variety. It's not a matter that X and Y variety models are languishing on the shelves but Z and AA models hard to come by. Apple can't even get out specific customer orders placed MINUTES after pre-ordering for weeks after launch let alone stock even just one SKU in stores.

From my observations it seems 1) Apple wasn't prepared for a "worst case" scenario like a bum part discovery at the last moment and 2) once that "worst case" was discovered it arrogantly decided not to scale back launch countries until inventory was sustainable for a larger launch.

Meanwhile consumer excitement (not geek excitement) for the watch is almost nonexistent because of this unavailability. Apple has a lot of work to do here for the holiday season.

It's really surprising to me why the business or tech press hasn't tried to ask TC, Schiller, or Williams, the 3 Apple execs most responsible for operations and marketing, any tough questions. Even more annoying that Angela Ahrendts seems to used by Apple as a sacrificial lamb when her responsibilities are rather tangential to this mess. I have issues with how she is selling the AW in store, but that is a different discussion.

 

[dacreativeguy]

Pebble sold 1m watches in 2 years. Apple sold 3m in 2 minutes. Flop you say?

 

[KPOM]

The launch was botched -- simple as that. As more details become clear it's basically impossible to deny this. That doesn't mean the watch itself is going to be a flop, and I don't think it will be, but it doesn't exactly help.

The holidays are much more important than the initial launch. The iPhone had a slow launch, as well. It took 74 days to sell the first million, and now it's by far Apple's most important product. The watch likely won't ever reach those echelons, but it could eventually sell in similar quantities as the iPad. Since the watch is intended as an accessory to the iPhone, I think Apple will gradually align the release of future watch variants to the iPhone launch. The timing would be perfect. Millions of people go to Apple Stores in the weeks around each iPhone launch date, and then it leads directly into the holiday shopping season.

 

[mojolicious]

Wow, what a great indicator of worldwide sales expectations.

Presumably you're not including the 2.3 million orders that are expected to ship by the end of May?

That's a sales sheet of $1.3 Billion-sounds like quite a bit of interest to me, but then I haven't gauged interest from your local Apple store.

Assuming that Ctguy's Apple Store isn't highly unusual, surely a lack of in-store 'buzz' about the Watch is an indication that short term ongoing sales might tail off. Those initial orders were mostly placed the moment the Watch went on sale; if everyone who is enthused by the Watch sight unseen has already ordered, then it's the physical stores that will have to generate future sales.

 

[kdarling]

They sold more in one day that all the other smartwatches sold over two years. I don't see how that is anything remotely like a flop.

The most oft-quoted estimate of first weekend Apple Watch orders was 2.3 million. (With an average of 1.3 devices per order, it could be that up to 1/3 were done as double orders with the intention of returning whichever model was not liked as much. But let's go with the 2.3 million.)

Pro-Apple site AI claimed in February that there were 6.8 million smartwatches sold just in 2014. So, using their figures, the Apple Watch sold 1/3 as many of just those. Not more than all smartwatches ever sold.

Of course, it'll also take months to deliver all those Apple Watch orders, and Apple can't count them as sales until they are.

So yes it sold very well at first. But not more than all others ever sold. Perhaps you left out some parameters, like "more than all Pebbles and Android Wear ever sold through the end of 2014." Now that would very likely be true. Pebble was a Kickstarter project and Android Wear didn't start selling until the latter part of 2014.

 

[2010lexus]

They sold more in one day that all the other smartwatches sold over two years. I don't see how that is anything remotely like a flop.

///

 

[RogueApple]

When the iPhone launched I bought every model... Why? Because AT&T let me. I could upgrade at the subsidized cost while making money selling my old device. Nowadays it's harder to do that and providers have really clamped down on annual adopters (unless you have upgrades avail on other lines). Apple watch allows people to upgrade as frequently as they choose while leaving their slightly outdated phone tucked safely in their pocket.

When the iPad launched I was first in line. I remember taking my week old first gen iPad to a corporate meeting and showing the "big wigs"... Some loved it and saw the immediate benefits for an outside sales force. Others laughed and said I was just justifying my expensive toy and veiling it as a work thing. 3.5 years later they issued us company owned iPads and fully integrated our online activity with Safari.

Apple pay... What is there to say? From a security standpoint I see the pros. From an ease of use POV it's a toss up. Is it easier to grab your phone, open passbook, and hold it to the reader, and then assume the clerk even knows what you're doing? Idk, seems like my wallet and CC are simpler at times.

I'd say the launch of the Apple Watch is a flop. In a week since its release we are not even past the first 3 minutes of orders! And very few are going to take the chance and buy something sight un seen. However even these early sales numbers make the watch anything but a flop. It may be a fad that loses momentum over time, but that time isn't a week and 5 minutes worth of orders.

 

[mightyjabba]

Apple watch allows people to upgrade as frequently as they choose while leaving their slightly outdated phone tucked safely in their pocket.

True, but it's not subsidized so it seems like a bigger expense to many.

Apple pay... What is there to say? From a security standpoint I see the pros. From an ease of use POV it's a toss up. Is it easier to grab your phone, open passbook, and hold it to the reader, and then assume the clerk even knows what you're doing? Idk, seems like my wallet and CC are simpler at times.

Have you actually used Apple Pay? You don't have to open passbook, or even unlock your phone. Just hold it to the reader and put your finger on the TouchID sensor. With the watch, just double press the side button and hold it to the reader.

 

[thomasfxlt58]

Separate the design and sell-through from manufacturing and fulfillment. They get an A for the first two and a D for the latter. Cumulative GPA is C+ equivalent. For a 4.0 company, that's cause for remediation. I hope they are hitting the books.