The Apple Watch is Another Great Opportunity for Apple

They’ve been in this position before, but never quite like this. Next week, Apple will host a media event called “Spring Forward” where we will most likely hear more details about the  Watch and its release. Like several Apple products before it, this watch is not the first product to the market, but it has a good chance of becoming the market leader.

The MP3 Player

Rewind to 2001. There were lots of mp3 players on the market, but there wasn’t really a market leader. Most had Terrible UI, none of them had a good ecosystem, and they weren’t made incredibly well.

Apple wasn’t the first to the market, nor did they release a product that had the most storage, but they brought a quality product with great design and people ate it up. It was small, thin, and beautiful. It had those iconic white earbuds. The iPod redefined the category and became like Kleenex – you no longer had an mp3 player, you had an iPod, even if it was an RCA or Creative device.

No one ever took over that market. The iPod was Apple’s greatest opportunity, and without much to lose, they came out swinging. They quickly iterated, adding USB and Windows support. They they created new categories with the Mini, followed by the shuffle, the photo/video iPods and finally the iPod Touch. This was one of the only times that they cornered every market – low end to high end.

The Phone

In 2007, Apple released the iPhone. There were lots of phones on the market, and some major players in the smart phone category, but Apple again released a well-designed product and redefined the category. They also changed carrier relationships forever. There was no AT&T logo on the front, and no carrier was going to have access to the operating system. People forget that the touch screen interface on the original iPhone was revolutionary. People also forget that Blackberry, Palm, and Motorola phones looked nothing like the iPhone and soon everything did.

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Image from http://pulse2.com/2012/07/26/google-warned-samsung-not-to-copy-apple/

 

The iPhone also changed the way phones interacted with computers. It changed how software updates were delivered and applied. All of a sudden your device wasn’t dependent on a carrier for updates, and it also didn’t become obsolete after two years. Very soon came the iPhone ecosystem of the App Store, which changed software development and web development and helped usher in the era of responsive design. Its lack of Flash also accelerated Flash’s demise and the rise of HTML5.

Apple came into a crowded market filled with heavyweights who doubted Apple’s ability to pull the iPhone off. It was an instant hit and to this day Apple cannot make enough of them when it launches a new model. They succeeded because they used their strengths in design and logistics to pull off what many thought impossible.

The Tablet

Speaking of logistics, the iPad would never have been possible without the success of the iPhone, and Tim Cook’s brilliant move of buying up flash memory. They took what they learned with the iPhone and applied that to a new device. There were tablets on the market, but used styluses, they were bulky, and many were laptop+tablet combinations. Most ran Windows. Many people doubted the existentence of a serious market for the tablet. Enter the iPad.tech-ipad-air-2-05_1

Apple dropped the stylus, made the tablet thin and light, and brought a great UI that utilized the extra screen real estate. It was not an under-powered machine like Netbooks were. The iPad is an incredibly powerful and useful device for creation and consumption. The iPad Air 2 is crazy. I edit HD video, add titles and effects in real time, edit 22mp photos, create music in Garageband, etc. and it just flies. When Steve Jobs sat in that chair and used the iPad during its introduction, he was demonstrating the usage that Apple had envisioned – people would leave their phones on their dresser or by the front door, and instead of sitting in front of a desktop computer or having a laptop on their lap, they’d hold the internet in their hands. And the tablet category took off. It has been hindered by large-screen phones, but it’s still a great market and Apple is still making a lot of money from the iPad.

Again, there were products on the market, but there were no runaway hits. Apple brought great design and combined it with good software and some smart ideas around usage and they became the market leader overnight.

The Watch

0910_apple-iwatch_2000x1125-1940x1091A week from today, we will most likely know the release date and the rest of the pertinent information of the Apple Watch. Like the mp3 player, phone and tablet before it, the watch is entering a market that already exists. But this is a great opportunity for Apple and here’s why they will most likely succeed:

1. Disrupting the Market:

There are lots of watches out there. There are even smart watches. But there is no runaway hit. There is no real market leader. The Pebble is cool, but limited. There are various Android smart watches, but no real market leader. The smart watch market is not mature. And no smart watch works with the iPhone like the Apple Watch will. Apple has the same opportunity they had with the iPod/iPhone/iPad, but this opportunity is even better:

  • they have a built-in audience of iPhone users who already spend a lot of money on accessories and apps
  • the smart watch market has not yet taken off, so there is no leader to catch up to
  • there are no well-designed, high-functioning smart watches for iOS devices

Apple targets the higher end of the market, and their users then spend money on and from their devices. They buy cases, headphones, speakers, wallets, microphones, camera accessories, cables, and more. They also do the most online shopping. And of course the App Store is a major money maker not only for Apple, but for developers. Apple has a built-in audience ready to spend money. The same cannot be said about Android users.

2. Luxury

What I find most intriguing about the state of consumer electronics today is that a billionaire can’t buy a better phone than me.

– Chris Marriott, “A Billionaire’s Phone

Right now, a billionaire uses the same phone as his or her customers. Apple attacks the high end of markets, but they don’t have any luxury products. Their phones cost the same as flagship Android devices. Their laptops cost the same as high-end Windows machines. And if their products are more expensive than competitors, it’s not in the stratosphere when you consider build quality and function. They don’t have diamond-encrusted iPhones. They don’t have gold-plated iPads.

But the Apple Watch is giving them the opportunity to go all out on luxury. The Sport will start at $349. The regular Apple Watch will be much more than that. And the Watch Edition is rumoured to be thousands of dollars. They’re finally making a product that covers their normal high-end market and also extends to luxury market. There is an Apple Watch Sport for the guy who makes $50,000 and there’s an Apple Watch Edition for the gal who makes $500,000. They can charge whatever they want for the Edition, and there will be people who will pay it.

How big is the smart watch market? It’s not big at all right now. But how big is the Apple Watch market going to be? It could potentially be huge for Apple. And to be clear, those are two different markets. Almost no one who owns an iPhone and wants a smart watch has picked up a Moto 360. They don’t want a “smart watch.” They are waiting for an Apple Watch.

And even if the market turns out to be small, the profits Apple stands to make, especially on the two more expensive models, are potentially huge.

The doomsayers are out to lunch. Apple has proven over and over again that people will pay for good design. Now they’re about to prove, like Coach and Lexus, that people will pay for luxury.

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