Evan Goldstein

About the Author Evan Goldstein

Evan Goldstein is a current student at Brandeis University majoring in Economics and History. He is the VP of Finance for TAMID Consulting at Brandeis.

Apple Inc. Finds Wearable More Profitable Than Expected

Apple Inc. (NASDAQ:AAPL) has made bigger than expected profits on secondary purchases of the band accessory to the watch. Around 20% of Apple Watch customers have added the spare band to the already pricy timepiece, giving Apple a further inflow of cash.

The secretive tech giant has yet to release the amount of units sold, let alone profits. Slice Intelligence, a research company that collects e-mail receipts, estimates the company has sold 2.79 million units as of mid-June. If band purchases are any factor, watch sales are just the surface of Apple’s profits.

The entry-level sports band sells for $49 while only costing $2.05. This is according to a breakdown of the 38-millimeter type by HIS, a technology research firm. Yet these figures do not account for packaging and shipping and so are not absolutely reflective of the true costs incurred, stated by analyst Kevin Keller of IHS.

Slice analyzes e-mail receipts from 2 million people, depictive of US online shoppers, 20,000 of whom purchased an Apple Watch. The Data displayed that about 17% of customers bought multiple bands. Slice’s data is similar to data from the Department of Commerce as well as Amazon.

The most popular choice for both the paired band and the separately ordered band is the black sport type. For the separately ordered band, the runner-up in popularity is the $149 Milanese loop, signaling many users are combining a practical sport type with a luxurious type to create a more versatile watch, commented Kanishka Agarwal, chief data officer for Slice. “People are trying to get two watches in one,” he said.

The popularity of spare bands suggests some consumers may be spending more on the Apple Watch than they intended. Carolina MIlanesi, head of US Business at Kantar Worldpanel ComTech and chief of research at Slice, said “It’s just a psychological thing……I start with the least investment, and then I spend more money, but I get something else.”

Unique bands assist users in coordinating the watch to their outfits and give the device a more personalized touch, integral to its value, said Allen Adamson, chairman of the branding firm North America for Landor Associates. He said that “Apple needs to win the functional war, but they also have to win the fashion campaign and make it fun to wear,”

Apple has created an opportunity for third-party designers to make their own bands and will not partake in any of the inflows from their sale. If third party bands are widely successful, it may cannibalize the revenue from Apple’s own accessories. Nonetheless, possessing a stylish spectrum of bands to enhance the value of the watch is the most essential attribute, the extra inflow for Apple is a peripheral benefit.

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