There's a considerable degree of negativity surrounding Apple's (AAPL +1.18%) recently launched Apple Watch lately. Different media outlets have emphasized the fact that sales levels are reportedly down by nearly 90% from the first day of pre-sales availability, and this is claimed to be an ominous sign for the product. However, investors may want to take these reports with a big grain of salt.
When the numbers don't mean much
According to data from Slice Intelligence, Apple is currently selling less than 20,000 Apple Watches per day. Slice calculates that Apple sold an average of 200,000 devices during the pre-launch week in April, so this would mean a massive decline from those levels.
However, these statistics don´t really tell the whole story. To begin with, Adam Levine-Weinberg did a great job in this article explaining how Slice's data-collection methodology can lead to erroneous conclusions. The research company tracks purchases via e-receipts, so maybe the data is not very representative once consumers start buying the Apple Watch at the stores, as opposed to doing it exclusively online. In addition, it's hard to tell how the international rollout of the Apple Watch will affect the data reported by Slice.
Even assuming that these figures are 100% accurate, they don't really say a lot about Apple Watch and its demand levels, let alone the product's true potential over the long term. Apple sold 1.5 million units in the pre-launch week. These were mostly customers who never had the chance to interact with the device, mostly early adopters with big loyalty toward Apple.
Over time, more potential customers will have the chance to interact with Apple Watch, learn what it can do, and listen to what others have to say about the product. We need to be patient when analyzing true demand levels because the first few months in the market hardly tell the whole story for a new product.
The long-term view
Apple is scheduled to report earnings on Tuesday, July 21, so investors will probably have access to more first-hand information about Apple Watch sales by that date. Still, sales data during the quarter can be remarkably misleading when it comes to evaluating a product and its potential over the years.
As a reminder, the iPhone sold only 1.12 million units during the fourth quarter of fiscal 2007 and 2.3 million in the first quarter of fiscal 2008. Based on those figures, it would have been almost impossible to measure the iPhone's true growth potential. For instance, Apple sold more than 135 million devices during the first two quarters of fiscal 2015.
If Apple Watch can bring the right features to the table, consumers will want it, and Apple will increase production over time. With this in mind, evaluating the device in terms of its strengths and deficiencies could be a better idea than trying to reach long-term conclusions from short-term sales numbers.
Functionality is undeniably very important, but few people will buy an Apple Watch unless it looks and feels cool. Wall Street analysts tend to downplay this factor, focusing instead on tech specifications and other forms of measurable data. However, a watch is a fashion accessory, and also a very personal one, so design and aesthetics will most probably play a major role in the product's chances of success.
Apple Watch includes an activity tracker that monitors variables such as calorie expenditure, exercise, and the number of times you stand up during the day. It also has a workout function to keep records of different activities. Wearable devices for fitness applications are quite hot right now, so this could be a big area of interest.
Importantly, Apple Watch includes sensors that collect and supply apps with real-time data on physiological functions such as pulse and blood pressure, and users can incorporate factors such as height and weight into the health app for a more complete picture of their personal health situation.
When it comes to preventive healthcare, the benefits could be truly amazing, even if it will take some time to clear regulatory hurdles and establish data reliability. If Apple can manage to make a valuable healthcare device of Apple Watch, it could turn the product into much more than just another tech gadget; it could become almost a necessity for many people.
Media outlets tend to go for headlines that attract a lot of attention, and saying that Apple Watch sales are down 90% can sound like an important piece of news. However, this number doesn't really say much, and it's far too early to measure the true long-term potential of the Apple Watch.
