Has Apple just supercharged the smartwatch category?
This story first appeared in the September 10, 2014 issue of WWD. Subscribe Today.
After months of anticipation, the tech company’s chief executive officer Tim Cook introduced the Apple Watch to the world Tuesday, along with two new iPhones, including the larger-screen iPhone 6 Plus, and a new Apple Pay payment system. Cook described the smartwatch, which will start at $349 and go on sale early next year, as the “most personal device we’ve ever created.”
It’s an introduction with a good bit of fashion flair, one higher-end version features rose gold detailing, that marks Apple’s official arrival on the fashion scene.
That makes for another extremely well-funded, design-savvy and logo-oriented competitor in the accessories space. The question is whether Apple’s marketing savvy and brand reputation will be enough to beat out more accessories-focused brands like Swatch group, which is due to unveil its own smartwatch next year, or even hip celebrities like Will.i.am, who is plotting his own smartwatch introduction for 2015.
Wall Street certainly seemed to be taking a wait-and-see approach to Apple’s moves Tuesday. After shares initially soared 4.5 percent on the releases, they slid back to close down 0.4 percent at $97.99.
Alex Blanter, a partner in A.T. Kearney’s communications and media and technology practice, said the decline had “more to do with the huge build-up of expectations around the product’s release rather than the product itself. Remember, with previous releases by Apple, the stock has tended to rise until the day the product is announced, and has fallen on the day of the announcement. This release seems to be following a similar pattern.”
“Apple’s entry into this space is good news — for now,” Blanter said. “If you look at the wearables market — specifically smartwatches — it’s been crowded but not penetrated. If you look at total number of smartwatches that have been sold versus iPhones or iPads, there are very few people who have them.”
He pointed to Samsung, Motorola and Intel getting into the space — but even though Apple’s release of the Apple Watch had such high expectations, there isn’t yet a competitive thread to these devices because the market is so immature. And the Samsung Gear range has been seen as somewhat of a disappointment, failing to ignite the excitement that its smartphones have and that caused Apple to introduce a larger-screen version of the iPhone.
Blanter argued that more players would lead to more innovation in the space.
“Everybody is still trying to figure out how to make a smartwatch a truly must-have device, rather than an interesting and curious novelty,” he noted.
Click Here for a Look at Some of Apple Watch’s Smart Competitors >>
Motorola, for instance, revealed its first smartwatch last week, the $250 Moto 360, and it was touted as a modern timepiece where design came before the technology. Like Apple, Motorola took its time in entering the wearable category.
“We realized that rather than designing the watch around existing technology, we should really take a step back and breathe and figure out what design we think it should be,” Motorola design director Dickon Isaacs told WWD last week.
Or as Will.i.am told WWD last month on the launch of his eyeglass line ill.i Optics in talking about the wearables category, “When you have things you put on your body that have tech in them, you need to design them the way you would design things that didn’t have technology in them. That’s why we’re starting with the aesthetics, like the glasses. Then we will put the tech in it, but all the while, let’s start building the tech. You have to work in two silos: tech and fashion. All the while you know they are going to marry.”
Design was also a key consideration for Apple, as it has been for the brand since the first Mac appeared.
Cook said the product will “redefine what people expect from a watch” — technologically and aesthetically. In addition to the ability to personalize the interface, the watch comes in six versions within three core collections: Apple Watch, Apple Watch Sport and Apple Watch Edition. The watch comes in a small and large size.
The sport version features a sweat- and chemical-resistant sport band, a leather loop strap with a concealed magnetic closure, a leather strap with a solid metal clasp and another leather strap that has a classic timepiece buckle.
Across the offering, there are styles that include a stainless-steel link bracelet option with a deployment clasp and another version comprised of Milanese loops that form a stainless-steel mesh strap. At the high end, there’s a version that contains 18-karat yellow or rose gold elements.
“[We’ve been] working on the Apple Watch a long time and we assembled an amazing team to do so,” Cook said as he introduced Kevin Lynch, the lead on software efforts for the Apple Watch, who performed a demo.
He showed how the digital crown works, a new navigation tool designed specifically for the device. He called the clock the watch’s “center of the universe,” with apps the user frequently uses all placed around the clock. Rotating the crown will give an overview of all the downloaded apps. Wearers can choose the design of their watch face — a classic time stamp to any number of themes — by touching the screen and rotating the digital crown.
Apple Watch users will be able to receive and send text messages, access photos, monitor activity and fitness, send a sketch, get directions and more. Also introduced was WatchKit, a series of tools to help developers adapt existing apps for the Apple Watch.
The company brings a good deal of tech cred to the quickly growing smartwatch arena.
As reported, a recent Citi Research report projected the smartwatch sector would balloon to $10 billion in 2018 from $1.4 billion to $1.8 billion this year. And that’s just part of the wearable technology market, which, as a whole, is projected to hit $30 billion in sales in four year’s time.
“If the market is poised to expand that rapidly, Apple is the only company out there that people inherently trust as it relates to bold new products like that. This is a great first step for them,” said John Bowden, cofounder of private investment network Coalition.
He admitted it might be difficult to change the public’s perception of what wearable tech can be, referring to the Casio calculator watch from the Eighties. But Bowden said if anyone can change the view that “anything with a screen is inherently a little bit geeky,” it’s Apple.
Simeon Siegel, executive director at Nomura Securities, looks at the smartwatch category very much through a fashion lens. Over the past three years, a skyrocketing accessories segment led fashion watches to become an “It” item. That, combined with brands wanting to be at the forefront of technology, will result in partnerships like Fossil and Intel or Google and Luxottica, according to Siegel.
“If it’s going to work for them and grab share, it’s going to have to become a fashionable piece rather than a functional piece,” Siegel cautioned smartwatches as a sector.
The tech firm has been bulking up its executive ranks to bolster its fashion cred.
Apple hired former Yves Saint Laurent chief Paul Deneve as vice president of special projects and former Burberry ceo Angela Ahrendts as senior vice president of retail. Since coming to Apple, Deneve has brought on other former YSL employees to work on his team, including Europe president and retail head Catherine Monier. Ahrendts has made some hires of her own, including Musa Tariq, who joined last month as digital marketing director, Apple Retail, leaving his post as Nike’s global director of social media and community. Tariq was Ahrendts’ first digital marketing hire at Burberry, where he spearheaded social media and worked on campaigns such as “Art of the Trench.”
Now the market will simply have to wait until next year to see whether massive lines form outside the Apple stores as they did when the first iPhone was introduced.
“It’s dramatic,” Al Sambar, retail strategist at Kurt Salmon, said of the firm’s entry into the smartwatch and wearables space. “As sexy as the watch may be, it’s the implications of the platform and developer support that are the most interesting part of this announcement. It’s going to support developers who are racing to innovate. It was a land rush for your screen when the iPhone came out, and this will be similar.”
What’s most compelling for Sambar is that Apple has created an entire platform that gives customers new ways to interact in a retail environment. The Apple Watch allows a consumer to confirm a purchase via fingerprint with iTouch and now with the release of Apple Pay, there is a financial system and a platform that allows developers and retailers to integrate this into their payment transactions. Target said Tuesday it would begin to use the system as the discounter continues to implement moves to overcome the hacking scandal that hit it last holiday season.
Apple Pay will come with every iPhone 6 and iPhone 6 Plus and will be available in the U.S. next month and work with Apple Watch.
The system doesn’t store a user’s credit-card number. Instead, a dynamic, device-only account number is issued and stored, so if one’s iPhone is lost or stolen the user can suspend payments. Credit-card data isn’t stored on the device.
While pitching the new pay system, Apple executives took care to highlight the company’s security after a string of recent data breaches ruffled consumers, including the posting of nude photos of celebrities like Jennifer Lawrence.
“[Apple is] not in the business of collecting your data,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services Tuesday.