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The Apple Watch is already devastating the watch market even though barely anyone thinks it's 'cool'

Apr 13, 2015, 18:55 IST

The Apple Watch hasn't even the hit the wrists of consumers yet but that hasn't stopped the tech timepiece from devastating the wider market.

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The latest analyst note by Key Banc revealed today that people were so excited about buying the watch, even before it was launched or any firm details on what was available was disclosed, that consumers were holding off from purchasing another "fashionable" watch brand elsewhere:

In fact, Key Banc warned in its note that fashion watchmaker rivals, such as Fossil and Movado, haven't fully prepared themselves for how disruptive the Apple Watch will be on their future revenue and market share (emphasis ours):

The moment of reckoning is here, we think the Apple Watch will be highly disruptive to the traditional fashion watch market. After trying on the Apple Watch, visiting stores, and based on our field work, we are now more convinced that the Apple Watch will be disruptive to the fashion watch market. At a minimum, the widespread buzz may cause something of a standstill in the watch market. We do not believe retailers in this case, and by our deduction, Fossil and Movado, have explicitly factored in any level of cannibalisation. In fact, we think that 2015 EPS estimates may embed an improvement from tepid 4Q14 trends. We think the level of disruption could be significant and are reducing our estimates for Fossil and Movado.

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Key Banc also pointed out that watch sales slowed to low single digit in 2014 and the Apple Watch will only add "incremental pressure" on an already squeezed market:

"The fashion watch industry encountered significant growth in the 2010-2013 time frames, we think owing to significant fashion innovation and the emergence of a brand that offered reinterpreted high-end fashion at accessible price points (Michael Kors)," said Key Banc analysts.

"This drove what we view as unsustainable trends in the fashion market. Concurrently, the high end was seeing the benefits of a Chinese consumer showing significant interest in the fashion watch market. The slowdown started at the high end, but we think industry growth could have been flattish in 2015, even without cannibalization from the Apple Watch.

"The Apple Watch could give rise to an industrywide contraction. This has some historical precedence; we note that the quartz crisis in the 1970s caused significant dislocation and contraction in the Swiss mechanical watch industry."

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The Apple Watch is ridiculously popular

Apple Watch popularity is already huge. Apple racked up 1 million preorders in the US for its new smartwatch on Friday, according to the research company Slice Intelligence. Consumers won't even be able to physically get hold of them until April 24, at the earliest.

Prices range from £299 to £13,500. You'll only be able to use the Apple Watch with iPhone 6, iPhone 6 Plus, iPhone 5, iPhone 5C, and iPhone 5S.

Key Banc said that Apple Watch pre-orders were far outstripping initial supply and the projected uptake would only add to Apple's watch market share.

"Unlike previous Apple device launches, Apple suggests it is not saving significant volume for in-store sales. This suggests the initial pre-orders will likely be enough to make Apple one of the top three producers of >$200 watches in its first quarter," said Key Banc analysts.

But, Key Banc did warn that the challenge facing Apple Watch's long term sales growth is simply that it isn't deemed "cool" enough by the wider market.

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According to Key Banc's survey of 915 consumers, if you wear an Apple Watch it apparently makes you look like you're "trying too hard":

"Given our view that the Apple Watch lacks overwhelmingly compelling functionality, we believe a successful
marketing program is critical to selling the device outside the base of extremely dedicated Apple users," cautioned Key Banc.

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