(Andy Kiersz/Business Insider)
The next month of sales will be critical for the future of Apple's newest major product, the Apple Watch.
Analysts and Apple executives will be looking at the device's sales during the all-important holiday period — and December in particular, the core of the holiday shopping season, will be crunch time for Apple's category-leading smartwatch.
Apple needs to reverse a declining trend: In the second year that the Apple Watch has been on sale, it has seen big annual declines.
In the third quarter of 2016, Apple shipped 1.1 million watches, according to an estimate from IDC. That was down 71.6% from the same time in 2015, where Apple shipped 3.9 million Apple Watches, according to the same researcher.
Apple does not disclose internal sales numbers for the Apple Watch, in contrast to its regular public reports on sales of the iPhone, iPad, and Mac. There are signs that the Apple Watch sold better in Apple's fiscal 2015 than in 2016, even though there was 33% more selling time in 2016 (The Apple Watch did not go on sale until April 2015).
Even Apple CEO Tim Cook has pinned his hopes for the Apple Watch on the holiday quarter. In April, he said:
Turning to the Apple Watch, unit sales met our expectations in the quarter. For some color on how we think about Apple Watch sales, we expect its seasonality to be similar to the historical seasonality of iPod, which typically generated 40% or more of its annual unit sell-through in the December quarter.
Last year, the Apple Watch sold 4.1 million watches during the fourth calendar quarter, according to IDC. It is leading the smartwatch market by large margin, but the entire category is having a lot of trouble finding traction with consumers, and sales for all smartwatches dropped 50% on an annual basis earlier this year.
Apple's wearable gadget will have a lot of tailwinds this quarter helping it seem more attractive to consumers:
- This quarter will be the first full quarter in which Apple's updated Series 2 model will be on sale. Last year's model got a price cut, too.
- Apple recently revamped the Apple Watch software to be simpler, faster, and more attractive.
- Retailers are heavily discounting the Apple Watch and using it as a promotion to get customers into stores. During Black Friday, Macy's sold the Apple Watch Series 1 for $198, a discount from its $269 list price. Target is taking $150 off some models.
Cook has never called the watch a "hobby," as Apple has done with other less-important products like the Apple TV. He has said that Apple is still "learning" from the reaction to the device — for example, Apple's marketing now puts a lot more emphasis on fitness capabilities, including a new Nike-branded model.
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