Apple Watch’s Big Quarter and a Series of Firsts

It is no secret that I’ve been very bullish on Apple Watch since day one. I’ve held my ground against the naysayers and defended this product because I believed in it and the broader role it can and will play in the future of computing. After a rough second year, when many of the naysayers thought they were right, Apple Watch is truly gaining steam.

I love this headline even though it is wrong: “Apple and Android are destroying the Swiss Watch Industry.”

Notice the trend line of Swiss Watches. It’s not dropping off dramatically but rather has stayed consistent. That being said, that market is not getting bigger and it does run the risk of being disrupted by smartwatches. So it is relevant that one of Apple Watch’s firsts is that it outsold the entirety of the luxury Swiss brand’s volume. That being said, any impact to the Swiss market is coming from Apple not Apple and Android as the headline suggests. Android smartwatches were a tiny sliver of the overall smartwatch sales likely SHIPPING much more than a million units in my estimates. I’ve seen a few go as high as 1.5 million but I believe that to be a generous estimate.

Another key first for Apple Watch in the wearable market narrative is that Apple overtook Fitbit in annual sales of wrist-worn technology for the first time.

While we don’t have data yet to fully validate this, my original theory was that Fitbit would serve as a feeder to Apple Watch. Meaning a consumer who just wanted to get a low-cost health/fitness tracker would start with a Fitbit because of brand, cost, etc. Over time that consumer would realize they found value in getting health/fitness data and would then graduate to an Apple Watch. In some very early survey work I did with Wristly, we did find pockets of data suggesting consumers were replacing their Fitbit’s with Apple Watch, but I hope to quantify this on a larger level when we do our next wearable study.

Regardless of how Apple Watch got here, after three years, it is finding its place in the market. The challenge Apple Watch faced in its first years were people expecting it to launch out of the gate and grow with a steep S-Curve sort of like iPad did. I knew that would not be the case and to all those who called it a failure because its sales didn’t ramp like expected I tried to caution the adoption cycle of a product like Apple Watch would be a slow ramp and that is exactly what we see happening.

When it comes to the future for Apple, and the industry holistically, wearables are the path to what’s next. Which I continue to maintain is where Apple’s work in miniaturization remains cutting edge and critically important. People want to talk about AR glasses but, honestly, we will wear computers on wrists and ears way before we wear them on our face in mass.

But as I pointed out yesterday, voice assistants will become one of the primary ways we interact with these computers on your wrists, ears, and eventually our faces. This is why the further development of miniaturized computers coupled with the integration of smart, personalized, and contexturally aware voice assistant/AI systems are critical innovations to keep our eyes on.

While the health benefits of Apple Watch will continue to be a major draw, it is encouraging that consumers are grasping the wider value after their initial purchase. Communication features both in notifications and responding to texts calls are all things we see growing in value with Apple Watch owners. Many of the same leading indicators of data points we tracked very early on that gave me hope in the Apple Watch as a product are still true today and in some cases stronger than they were in 2015. For that reason, I’m still convinced in the upside for Apple Watch to grow and evolve and move the broader industry forward. Apple is likely to remain the biggest beneficiary here and we will see if the rest of the industry can catch up at some point.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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