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Here’s why the Apple Watch is a quiet success

By Kenny Yeo - on 27 Sep 2017, 1:05pm

Apple surpassed Rolex to be the number one watch brand in the world.

When the Apple Watch was first announced, I said that it would be a success. As it turns out, I was right. But there will always be naysayers who say otherwise. It is easy to say that the Apple Watch isn't perfect and that its abilities are somewhat restricted. It is also equally easy to say that they haven't sold as well as one might expect. There are, however, overwhelming evidence to suggest that the Apple Watch has been a sleeper hit. 

Those critical of the Apple Watch are unimpressed by the stats that Apple has trotted out. The fact that Apple has refused to share sales numbers hasn’t helped. But here’s some information that we have managed to glean.

Last year during the announcement of Apple Watch Series 2, Apple proclaimed that it was the second biggest watch brand in the world in terms of sales - behind only Rolex. This year, during the announcement of Apple Watch Series 3, Apple said that it has surpassed Rolex to be numero uno.

Apple still sold MILLIONS of Apple Watches. How many other smartwatch makers can claim the same?

Furthermore, during the unveiling of the Apple Watch Series 3, Apple CEO Tim Cook also mentioned that in Q2 2017, the growth of Apple Watch was up 50% year-over-year.  And in earlier in the year when talking about performance during the holiday quarter, Cook boasted that demand was so strong that Apple couldn’t make enough Apple Watches.

Market research firm Canalys estimated that Apple sold around 6 million watches during the holiday season and generated over US$2.6 billion in revenue for the company, which would amount to nearly 80% of the smartwatch market for that particular quarter.

Another market research firm, Strategy Analytics, estimated that Apple shipped around 11.6 million watches for the whole of 2016, putting them comfortably in first place as the best-selling smartwatch. They also believe that Apple has a smartwatch market share of around 55%, making them the runaway leaders in this category. Even within the HardwareZone community, Apple Watch has a very strong mindshare as seen from our Tech Awards 2017 Readers' Choice awards, and yet again from our Editor's Choice segment.

As I mentioned before, comparing sales of the Apple Watch to Apple’s other devices like the iPhone and iPad would be missing the point. A watch isn’t a necessity like a phone is. Heck, look around you, do you really see that many people even wear a watch these days? 

Casio took 35 years to sell 100 million watches, how long do you think Apple will take?

For a more apples to apples comparison, consider that the Casio G-Shock, one of the most popular watches ever made, only recently announced that it has sold its 100 millionth watch. Incidentally, 2017 also happens to be the 35th anniversary of the G-Shock. It took the G-Shock 35 years to hit 100 million. Apple has already sold more than 10 million watches in just over two years. 

Admittedly, for all of Apple’s successes, the Swiss watch industry remains largely unaffected. You might have read about Swiss watch exports dwindling, but this problem is largely a self-afflicted one and not one caused by the Apple Watch. Inefficient distribution, ineffective marketing, a disconnect in prices, and many other factors, have caused many to question the value of plonking down a couple of thousands of dollars on a piece of metal, albeit an exquisitely crafted one. The uncertain economic climate and global outlook don't help.

Would anyone stop yearning for this because of the Apple Watch? I think not. (Image source: Bexsonn)

The thing is, the Apple Watch was never meant to compete against such watches. They might compete for the same real estate on your wrist, but the person who has been eyeing a Rolex Submariner or a vintage Patek Philippe ref. 2499 isn’t going to stop just because Apple came out with a smartwatch. The allure of mechanical watches is a whole other story best saved for another day.

Nevertheless, the Apple Watch has had a profound effect on what watch insiders typically call fashion watches. The Texas-based Fossil Group is the undisputed leader in fashion watches. It makes watches for 17 brands in total, of which 6 are its own - such as Fossil, Skagen, Zodiac, just to name a few - and 11 are licensed - Adidas, Emporio Armani, Michael Kors, DKNY, Diesel, and more.

Months after the release of the Apple Watch, Fossil announced its own smartwatches.

The day the first generation Apple Watch went on sale on April 24, 2015, Fossil’s stocks were trading at over US$80. Right now, at the time of writing on the afternoon of 26 September 2017, it’s just US$8.83.

Prior to the Apple Watch, Fossil enjoyed five years of record revenues. It racked in US3.51 billion in 2014. In 2015, it was US$3.2 billion, and by the end of 2016, it was US$3.04 billion. 

Fossil's profits have fallen dramatically in the past two years since the Apple Watch's release. (Image source: Hodinkee)

Profits have fallen even more drastically. In 2014, the company made US$377 million. It was US$220 million in 2015 and just US$79 million in 2016.

Fossil CEO Kosta Kartsotis admitted as much and said:

“The introduction of technology into wrist devices, traditional watches came under pressure and we were disadvantaged. We didn’t have the technology capabilities to compete with smartwatches, leading to a decline in our market.” 

Fossil is now doubling down on wearables and connected devices. At CES 2017 earlier this year, Fossil announced a new range of smartwatches and connected devices and also said that it now has 300 wearables within its portfolio of brands.

Fossil is doubling down on making smartwatches.

From the looks of things, Apple seems to have nailed down the formula for its smartwatch. The latest Apple Watch Series 3 is faster than before and now includes cellular connectivity - a feature that many users have yearned for since the first Apple Watch. 

Apple has also smartly decided to shift the focus of the Apple Watch to health and fitness. If there’s one way to get people to wear a watch, it is to tell them that by wearing it you can be healthier and that you can live longer. 

watchOS 4, the latest operating system for the Apple Watch, adds more detailed heart rate monitoring and can even detect if you have irregular heart rates. It has improved workout modes and GymKit, a new feature that lets wearers sync their Apple Watches with compatible gym equipment.

The endgame goal for the Apple Watch is to be an indispensable health monitoring tool.

A long-term goal for the Apple Watch is to enable it to track your glucose levels using non-invasive methods. In other words, users won’t have to prick themselves to get a reading, which is typically the only way know to get a reliable glucose level reading. If Apple is successful, this would make the Apple Watch an invaluable monitor for users with diabetes. 

The takeaway is this: the Apple Watch might not have enjoyed the same level of success as the iPhone or iPad, but it is still an immensely profitable device. More importantly, the Apple Watch has a lot of promise and I’m certain that it will only grow in stature and importance for Apple in the coming years.

Kenny Yeo

Kenny Yeo / Associate Editor

Specifications are not everything. It's what you do with what you have that matters.