It might seem rather premature to wonder aloud if Apple Watch can keep Apple relevant in the fast moving and highly fickle consumer electronics space. However, considering how high the stakes involved are and the fact that Apple still gets more than two-thirds of its revenues from the iPhone, it makes sense for both Apple shareholders and industry observers alike to wonder how deep Apple’s product technology bench is. Is Apple Watch that ‘killer device’ that would keep Apple way ahead of the pack that wants to nip at its ankles? Can Apple Watch keep consumers engaged with the Apple brand long enough to maintain the iPhone’s global branded smart phone market supremacy? So far, Apple’s sales numbers for the Apple Watch suggests that Apple’s latest device launch will be a success. Based on preliminary figures, the Apple Watch is projected to sell 30 million units. Not bad for a launch. However, there are serious questions Apple needs to directly address if it wants to not just stay the dominant player in smart watches but also in the smart phone market.
The big problem with smart watches is they are exactly the kind of low profit margin, low cost mass manufactured devices that Apple is flat-footed in. Apple’s brand cache commands a premium when it comes to phones. However, will consumers continue to pay that premium when it comes to wearable devices like watches. The technology expectation is different. While you would want your phone to have all the latest and greatest technology in terms of functionality, the same might not be said for a smaller device like a watch. Sure, Apple products definitely have a ‘cool factor’ that consumers prize but is it really worth paying a steep premium for? Another key risk for Apple is the very real possibility of small wearable devices chopping up and compartmentalizing many of the features you’d find in a smart phone, much less a smart watch. Maybe sometime in the future, it would make more sense, in terms of both design and affordability to split up typical smartphone functionalities among many different wearable wireless devices. The way smart watch technology is being positioned, this looks like the ultimate direction of mobile device technology. Unfortunately, this is exactly the territory Apple doesn’t want to find itself in because wearable disposable technology isn’t exactly a high premium market segment.
While Apple company heads and shareholders have a lot to celebrate and be proud of at the present time, it’s anyone’s guess whether Apple can continue to ride the ever shifting wave of consumer electronic product preferences. It’s like trying to ride lightning. Consumer preferences can change overnight. Think about it, the Prodigy service for consumer content accessed via networks was a big deal until the Internet was commercialized. Similarly, Palm Pilot was hot until mobile touchpad devices became the next big thing. As strong as Apple’s market dominance may appear in the here and now, the only thing that’s predictable about the direction of consumer technology is that it is unpredictable. I am not sure Apple’s brand advantage would be enough considering the fact that wearable technology manufacturing is a race to the bottom-as far as profit margins and prices are concerned. If you own Apple stock now, start thinking five to ten years out. Thank me later.
