Apple Watch Series 3: Apple's other hit product

Apple Watch Series 3 is going to become the most popular “iPhone X-out-of-stock” consolation prize this season (other than an iPhone 8).

Apple, Apple Watch, watchOS, smartwatch, wearable, Apple Watch Series 3
Apple

Apple’s decision to put a cellular connection inside the Apple Watch Series 3 has confirmed my prediction that doing so would massively boost people’s interest in the device, which I now think will become the most popular “iPhone X-out-of-stock” consolation prize this season (other than an iPhone 8).

Tuning up

While remaining coy about the actual figures, Apple CEO Tim Cook has previously observed that Apple Watch is not only the biggest-selling smartwatch, but it has also become the biggest selling watch.

I’ve been tracking the trickle of Apple Watch-related data in recent weeks. What I’m seeing seems to confirm a big uptick in interest in the device. Here are some of those insights:

  • GBH Insights claims 80 percent of those purchasing an Apple Watch are buying one of the new LTE models, and that 7/10 purchasers are new Watch customers. The analyst expects 19 million Apple Watch sales in Apple’s FY18, expects 23 million in FY19 and calls the new model a “gate opener consumer product.”

[Also read: My first week with Apple Watch Series 3]

  • A recent Digitimes trade report cited supply-chain sources who said companies involved in the manufacturing and component supply chain all expect significant revenue gains on strength of Apple Watch sales.
  • Piper Jaffray’s recent teen consumer survey showed 82 percent of young Americans think their next smartphone will be an iPhone. It also showed that 17 percent of the group plan to purchase an Apple Watch in the next six months, up from 13 percent last year. Twelve percent of respondents already claim to have an Apple smartwatch.
  • Horace Dediu estimates Apple to have shifted 33 million of the things since launching the line, citing the 95 percent customer satisfaction score Apple has achieved with its product.
  • A Fluent survey shows that 27 percent of existing Apple Watch users say they will definitely upgrade to Apple Watch Series 3, an additional 22 percent will probably upgrade, while 19 percent say they “might or might not” upgrade.

Decode these data points, and you can see a potential 15 million Apple Watch sales to existing customers alone, with 12 million of these purchasing the new cellular models.

If GBH Insights is correct that seven out of 10 purchasers are new Watch customers, then this could suggest as many as 28 million additional sales over the next year for a total 40 million potential sales. (That’s more than the total population of Canada.)

Why so much interest in Apple Watch?

I do think the move to cellular, Apple’s brand reputation and the success of the iPhone have helped set the stage for the Apple Watch, but what I think is really driving the product forward is growing public familiarity with what it does.

You see, in the wide world beyond gadget culture, people still feel like wearing a smartwatch shows you are a bit of a geek.

They see it as tech fetishization and don’t understand why you would need to use one. I have one friend who proudly waves his grandad’s analog watch that he now wears and says how much he loves mechanical devices.

He’s right. Watches are not phones. Most people have been using mobile phones for long enough that they understood the value of the iPhone once it appeared. They use watches to tell the time, and they carry the phone for the other stuff.

Change takes time

How do you convince consumers they need a smartwatch? Apple’s solution is to design ways to use the device that make a real difference to people, and include things like:

  • Apple Pay
  • Activity
  • Exercise and fitness tracking
  • The heart monitor
  • Ambient notifications, communications and calls
  • Music streaming
  • A wide range of increasingly useful to use Apple Watch apps

The approach works.

People are becoming curious in Apple Watch

I now use Apple Pay for almost every purchase I make. When I began using a watch to pay for things, people didn’t seem to understand what was going on.

Today, the people I speak to while I pay for things have become much more curious and ask many more questions about the device.

This means so-called “ordinary people” (I hate that term because people are unique) are interested to learn about the Apple Watch's cellular functions and exercise features. They are beginning to understand that the Apple device can be see as a little like a more sophisticated Fitbit. (It’s a credit to Fitbit that consumers use that word as a generic term for any exercise monitor, but that's what I most hear.)

What this means is that the 95 percent customer satisfaction rating the Apple Watch has achieved among its c.30 million current users means early adopters (like me) are becoming happy evangelists for the device — and stories like this one also help.

We also saw this kind of pattern when Apple launched the iPod, when early adopters showed everybody else the inherent value of the device.

At Apple, your health is good business

Another strand to the pester power of the device comes in the run of stories that claim Apple Watch has saved people’s lives.

These stories boost the credibility of the device in terms of personal health.

That credibility takes another boost as a series of insurance companies agree to offer subsidized watches to insurance holders who agree to share health data from the watch with their insurance company.

Both of these narratives twin with the now widely understood perception that Apple is working very hard to deliver digital products that are good for your health.

This utility and increasing ubiquity are generating a wide consumer interest that reaches beyond traditional marketing channels.

Perhaps the best recent evidence of this comes from UBS analyst Edward Yen, who wrote: "The Apple Watch appears to be gaining traction, with interest [on Google Search] in the Series 3 around its announcement greater than for the Series 2, in all geographies.”

That’s no great surprise. And while I don’t think we’ll get much news around iPhone X sales in Apple’s forthcoming fiscal call, I think we may learn that the company now has another hit product in its latest edition watch.

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