Apple takes a slow, steady route with smartwatch sales

Apple is more interested in nailing a sales strategy for the Apple Watch than flooding the market with devices

Apple has deliberately taken a cautious approach to debuting its first wearable, preferring to see how people interact with the Apple Watch and ensure that the device meets the company's high quality standards instead of initially ramping up production.

On Friday, customers flocked online to pre-order the Apple Watch, generating a shipment backlog that quickly stretched into June. Pre-ordered Apple Watches were initially scheduled to arrive on April 24, the same day the device goes on sale. Last week, though, Apple said the Apple Watch can only be purchased online during its initial sales period, a time frame the company didn't define.

While some people may question if Apple underestimated demand for its smartwatch, Apple realizes the device is part of a new product category that requires a different sales approach, said Ramon Llamas, research manager for wearable and mobile phones, at IDC.

"To understand how best to sell this and distribute it, Apple want to take a very hands-on approach and make sure that they're the ones that are crafting the process and procedure of how to sell this to customers," he said.

For now, the watch can only be tried on at Apple stores and a handful of luxury retailers, including high-end department stores in London, Paris and Tokyo.

Cranking out Apple Watches and making them available from third parties that already sell Apple products, like Verizon, AT&T and Best Buy, wouldn't "be a recipe for failure," Llamas said. But that move would deprive Apple of important sales and marketing data from the watch's first buyers.

"Usually with any Apple product, if you are willing to be the first [buyer] and shell out this amount of money, there's a lot of information to be had on how to sell this correctly," Llamas said.

The Apple Watch's shipment delays could benefit competitors, especially with the backlog extended into June and possible longer, he said.

"This is a good time for all those other vendors not named Apple," Llamas said.

The buzz surrounding Apple's first wearable has increased people's interest in these devices. But consumers may not be willing to wait for an Apple Watch and could be turned off by its price, which starts at US$350 and can exceed $10,000. Instead, they may consider smartwatches from Samsung, Pebble or other wearable makers with products that can ship immediately and for a lower price, Llamas said.

The watch's backlog isn't a positive for Apple, said Ian Campbell, CEO of Nucleus Research, who doesn't believe the company is intentionally delaying shipments.

The backlog is tied to Apple's strict quality assurance process, which doesn't lend itself to getting products out quickly, Campbell said. And with the watch being a new product category, Apple is especially interested in selling a well-built device without flaws.

Apple should want to get the watch on as many wrists as possible, with an emphasis on software developers. They're the people who can create apps that show the value in using an Apple Watch to complete tasks, he said. Right now, the watch's apps just mimic the functions found on an iPhone app.

"You still need the app that will convince people to use [the watch], especially since the phone has to be in arm's reach to use with the watch," Campbell said.

The strong sales following the Apple Watch's debut shouldn't come as a surprise given the hype and excitement around the device, he said. The wearable's success depends on whether that interest is sustainable and genuine.

If people are using their Apple Watches on a daily basis six months after purchasing it, that would show there's a true demand for the product. But if the watch ends up in a drawer with other discarded wearables, that would reflect more of a curiosity in the product, Campbell said.

Apple planned to have the watch demand exceed supply, to protect itself in case the any hardware or software components were defective, said Ryan Martin, a mobile analyst at 451 Research.

"One way to hedge that is to limit the number of units you make available right out of the gate," he said, noting that Apple has followed this pattern when releasing other devices or entering product categories.

If the Apple Watch's robust sales continue, the company may have to balance the decision to limit production with market demand, he said. A middle ground may be to make more of only the best-selling watch models while continuing to gather user feedback on the device.

Fred O'Connor writes about IT careers and health IT for The IDG News Service. Follow Fred on Twitter at @fredjoconnor. Fred's e-mail address is fred_o'connor@idg.com

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Tags AppleIDCconsumer electronicsNucleus ResearchIan Campbell451 ResearchRyan MartinRamon Llamas

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Fred O'Connor

IDG News Service
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