Apple (AAPL -0.69%) recently announced it is entering the burgeoning wearable technology market with the debut of its new smartwatch, which the company has dubbed simply the Apple Watch. Starting at a price point of $349, the tech giant hopes this nifty gadget will give it an edge in the multi-billion dollar wearables space. However, three massive risks could stand in the way of Apple making a dent in this fast-growing market. Here's what investors need to know.
Timing matters
Apple's new timepiece packs impressive technology into two Apple Watch sizes: 38 mm or 42 mm. The device also boasts six varieties of watch straps ranging from a high-performance elastomer sport band to leather and steel mesh options. Yet, this might not be enough to draw in the crowds because of the delay in getting the product to market. That's right ... the Apple Watch won't be available for purchase until early 2015.
The Apple Watch. Source: Apple.
This means Apple's newest gadget won't be ready in time for the all-important holiday shopping season. More than one-fifth of all retail spending in the U.S. each year comes from the holiday season, according to Forbes. In fact, for many retailers, holiday sales account for as much as 40% of their annual revenue. Moreover, wearables are expected to be big sellers around the holidays this year. Unfortunately, Apple won't be able to take advantage of this trend, because its one wearable device won't be in stores yet. Ultimately, this could cause competing products to gain a foothold before the Apple Watch is even on shelves.
Nonetheless, timing isn't the only headwind facing Apple's first wearable device.
Alienating non-iOS smartphone users
In order to use the Apple Watch you must own an iPhone. True, this is one way for the iDevice maker to tie more consumers to the Apple ecosystem. However, it also significantly limits Apple's addressable market for this device. Consider this, Android was the top smartphone platform in January with more than 51% market share, according to comScore.
Source: Apple.
This means that a considerable number of smartphone users out there won't be buying the Apple Watch because it wouldn't be compatible with their existing devices. This brings us to the third biggest risk facing Apple's new device: competition from deep-pocketed rivals.
A crowded market
Apple loves to trumpet itself as innovative and disruptive. However, as exciting as the Apple Watch may seem it isn't the first smartwatch to hit the market. Resource-rich rivals including Samsung and LG already have wearable watch technology in consumers' hands today. On top of this, all of the competing smartwatches are currently available to customers for much less money than Apple's forthcoming $349 option.
Samsung's Gear 2 watch, for example, is priced around $299 today. Meanwhile, the LG G watch comes in at $229, followed by the Pebble at $150. While all of these devices range in terms of their functionality and tech specifications, Apple is entering a crowded market and it is late to the party. Not only is the market rife with competition, but also sales of wearable watches have thus far been disappointing -- signaling weak demand.
To be clear, this doesn't mean the Apple Watch will be a complete flop. After all, there are plenty of Apple enthusiasts out there fawning over Apple's latest and greatest products. However, given these three risks it could be a bumpy product launch for the company when its Apple Watch finally hits stores next year.
