What does success mean when we’re talking about selling products in the high-tech sector? The answer depends on which criteria you think define success. Some might argue for the number of users, adoption rate, or market share, while others might rely on revenue or profit.
While these are all measures of success they also aren’t the whole story. The fact is that success with high-tech products is always far more complex than a single measure … which brings me to the wave of articles this week declaring that the Apple Watch is becoming a failure.
Sales of the new Apple Watch have plunged by 90% since the opening week, according to a new market-research report.
Apple … has been selling fewer than 20,000 watches a day in the U.S. since the initial surge in April, and on some days fewer than 10,000, according to data from Palo Alto, Calif.-based Slice Intelligence.
That is a sharp decline from the week of the April 10 launch, when Apple sold about 1.5 million watches, or an average of about 200,000 a day, Slice estimates.
The problem with Marketwatch’s interpretation of Slice’s data lies in assumptions about the accuracy of Slice’s methodology. Here’s the background: Slice has an app that’s a “shopping assistant”; the company explains:
Watching your deliveries is more convenient and beautiful than ever--and now you can know at a glance exactly where your stuff is at all times. … Slice keeps an eye on your purchases for you—watching for price drops, tracking your packages, and alerting you on hazardous product recalls. Never enter a tracking number again! It’s all done automatically with the e-receipts in your email ...
The purchases referred to are only your online purchases and that’s why the reported steep decline in sales should be taken with a big pinch of salt. Marketwatch’s assumption was that the data were representative of the market as a whole, something that Slice points out in its report.
For example, the initial high sales were impressive and driven by people who pre-ordered. On the other hand, those of us who are more cautious, wanted to see the product before we bought it which has definitely resulted in delayed and in-store purchases that Slice knows nothing about. This makes the argument that the Apple Watch is a flop based on Slice’s report a pretty weak one. Sure, sales might be slowing but catastrophically? I don’t think so.
Moreover, the connected watch category is one that Apple now dominates. According to research firm IHS, Apple’s share of the market is around 56% and the company will ship something like 19 million units.
So, if you measure success by market dominance then I’d say the the Apple Watch is a huge success. What we don’t know for sure is whether the Apple Watch is profitable (the real sales figures and margins for the Apple Watch are not broken out in their financials) and from an IHS teardown it looks like the Watch might be a good little earner: “[the] Apple Watch has the lowest hardware costs compared to retail price of any Apple phone IHS Technology has researched.”
And, guess what, even if it were not profitable, it wouldn’t matter. Apple makes so much money on its core products (just under $102B from iPhones; just over $30B from iPads, $24B from Macs; $18B from iTunes and software) that any losses on the Apple Watch would be minimal (as a friend commented, “equivalent to a rounding error in their coffee fund”) and more than offset by the enhanced brand awareness and public relations value.
Now, looking at the Apple Watch from a reviewer’s viewpoint, I’d suggest that the Apple Watch has all the hallmarks of success because it’s pure Apple; outstanding in design, fairly useful (by which I mean considerably more useful than other connected watches I’ve tested), and it has a vibrant and growing third party application market.
So, given what we know about the Apple Watch and its sales and marketplace standing I’d say the product’s success is undeniable. What’s also undeniable is that there are a lot of people out there who’d like to see Apple taken down a peg. That’s something that may eventually happen but it won’t be because of the Apple Watch.