Jun 19, 2015

    Watch bands give Apple 2nd crack at buyers' wallets


    NEARLY 20 per cent of Apple Watch buyers are not only shelling out hundreds of dollars for the timepiece but are springing for a spare band too, giving the tech giant a profitable second dip into customers' wallets, according to data provided exclusively to Reuters.

    The data from Slice Intelligence, a research firm that mines e-mail receipts, offers a rare window into the money-making potential of Apple's first brand-new product under chief executive Tim Cook.

    The ever-secretive company has yet to disclose how many units of the watch it has sold, let alone how profitable it is. Slice estimates the company has sold 2.79 million as of the middle of this month.

    But if the band purchases are any indication, sales of the watch itself are just the beginning of Apple's profits.

    Although the entry-level sports band sells for US$49 (S$65), it costs only US$2.05 to make, according to an analysis of the 38mm size by IHS, a technology research firm.

    The estimates do not include expenses such as packaging and shipping, and may not capture the full cost of the material Apple uses to make the band, said analyst Kevin Keller of IHS.

    With the watch, Apple has put a high-tech spin on the razor-blade business model, in which a company sells a product for a modest price and then profits from sales of accessories, he said. "Of course, because it's Apple, it's sell the razor, sell the blade," Mr Keller joked.

    Slice studies e-mail receipts from a panel of two million people representative of online shoppers in the United States, more than 20,000 of whom bought an Apple Watch. Data from Slice, which analysed only bands made and sold by Apple, showed that about 17 per cent of shoppers purchased more than one band.

    Slice says its data lines up closely with information from the Department of Commerce as well as Amazon sales data.

    The black sport band is the most popular choice for both the band that comes with0the device and extras ordered by consumers.

    The US$149 Milanese loop is the second-most popular second band, suggesting many consumers are pairing a practical sport band with a more luxurious option to make the watch more versatile, said Kanishka Agarwal, Slice's chief data officer. "People are trying to get two watches in one," he said.

    The entry-level Apple Watch sport model - which starts at US$349 - has been the most popular among early shoppers, according to data from Slice. But an extra band - which fetches as much as US$149 for the quilted leather loop and US$449 for the stainless steel link bracelet - can raise the cost considerably.

    The popularity of spare bands suggests that some consumers may be spending more on the Apple Watch than they intended.

    "It's just a psychological thing," said Carolina Milanesi, chief of research and head of US business at Kantar Worldpanel ComTech, a consumer research firm.

    "I start with the least investment, and then I spend more money, but I get something else."

    Distinctive bands help customers match the watch to their outfits and lend the gadget a more personal feel, which is key to the appeal of wearables, said Allen Adamson, who is chairman of North America for Landor Associates, a branding firm. "Apple needs to win the functional war, but they also have to win the fashion campaign and make it fun to wear," he said.