Apple (NASDAQ:AAPL) opened up preorders for the Apple Watch on April 10, ahead of its official launch on April 24. Let's discuss three key numbers which investors should be aware of.
1. Number of preorders: 1 million
Apple Watch preorders likely hit 1 million units worldwide during its first weekend of availability, according to analysts at Cowen and Co. and Piper Jaffray.
By comparison, Samsung (OTC:SSNLF) shipped just 1.2 million smartwatches worldwide throughout all of 2014, according to research firm Smartwatch Group. But those shipments were enough to make Samsung the market leader in smartwatches, since only 6.8 million smartwatches were shipped globally last year.
Therefore, the Apple Watch's preorders put it on track to become the top smartwatch maker in the world. Analysts at KeyBanc believe that Apple will sell up to 20 million Apple Watches by the end of 2015. If Apple meets that forecast, Samsung's market share in smartwatch revenues could plunge from 23% last year to the low single digits in 2015.
2 Appointments to preorders: 85% to 90%
Apple only lets customers try on the Apple Watch by scheduled appointments. Customers interested in the $10,000-plus models are escorted to another private fitting area. Although that strategy seemed like an elitist marketing gimmick, it has generated robust sales. According to Cowen analysts, Apple Watch appointments during the prelaunch weekend translated to preorders 85% to 90% of the time.
Apple's strategy is rooted in luxury retail instead of consumer electronics. Burberry, Apple retail chief Angela Ahrendts' former employer, offers VIP room access to its top customers. The strategy is simple: to acknowledge the fact that customers are buying luxury products, and to pamper them with a higher class experience. The Apple Watch appointment strategy was arguably something that only Apple, which its expansive brick-and-mortar retail network, could have pulled off.
Samsung might eventually replicate Apple's appointments strategy, but its brick-and-mortar presence is limited to a few flagship stores and store-in-stores in big box retailers. Moreover, Samsung lacks the luxury clout to pull off such a bold, and arguably pompous, strategy.
3. Average purchase price: $707
Slice Intelligence reports that based on 9,080 Apple Watch preorders in the U.S. on Friday, the average Apple Watch buyer spent $707, more than double the $349 price tag of the entry-level version: 32% of customers bought the pricier $549 model, while a quarter ordered the optional $149 Milanese Loop band.
Assuming that the average purchase price hovers around $700 globally, and Apple sells 20 million Apple Watches, the device could generate $14 billion in revenues by the end of 2015, which would account for 6% of its estimated sales for the year. That's not a bad start, but it won't be enough to offset the importance of the iPhone and iPad, which respectively accounted for 69% and 12% of Apple's top line last quarter.
However, a $707 purchase price proves that Apple can raise price expectations for smartwatches by turning them into luxury devices. This complements a recent survey by Shanghai-based Hurun Research Institute, which found that Apple was the top brand for gifting among China's richest men and women. It also contradicts previous studies which claimed that a price tag over $299 would throttle demand. Last June, research firm ON World found that just 8% of 1,000 U.S. respondents were willing to pay over $299 for a smartwatch with health-tracking features.
The bottom line
The Apple Watch isn't a technological breakthrough, since many of its "new" features can be found on other smartwatches. However, its retail launch was a stroke of genius.
By setting up an elitist appointment system, Apple distances itself from electronics manufacturers and aligns itself with brands like Burberry and Louis Vuitton. The Apple Watch won't fully diversify Apple away from its top-line reliance on the iPhone, but its launch represents a promising way to pin its brand on the luxury market while sidestepping the commoditization of the smartphone and tablet markets.