Apple must slash smartwatch price to see more sales: Telsyte

The Apple Watch should cost no more than AU$300, according to analyst Telsyte, which warned that the tech giant could otherwise continue to see its sales in the wearables market fall.
Written by Corinne Reichert, Contributor

Industry analyst firm Telsyte has revealed new figures for the use of smartwatches in the Australian market, saying that only 205,000 of the wearable devices were sold during the first six months of 2015.

Telsyte's Australian Smartphone and Wearable Devices Market Study 2015-2019 attributed the negative growth in the smartwatch sector to a lack of apps, as even 10 percent of those who had purchased the devices have stopped using them.

The Apple Watch has remained dominant in the smartwatch sector, with 64 percent market share in Australia for the half -- though Telsyte noted that this was primarily due to the absence of new Android smartwatches being launched.

"The Apple watch remains a luxury gadget, with its sales price typically more than twice the average of rival Android-compatible smartwatches," Telsyte managing director Foad Fadaghi said on Tuesday.

"It is difficult to see mass market consumers paying as much as premium tablets or smartphones for wearable technology that does not have significant new or unique features."

Fadaghi added that the premium price Apple charges for its wearables is also impacting its sales, however.

"Smartwatches are not selling as fast as lower-cost fitness bands, and our surveys show consumers are, in majority, not willing to pay as much as a premium phone or tablet for a smartwatch," he told ZDNet.

"The ideal price point, we think, is AU$200 to AU$300 for both individual buyers and for the gifting market."

Fitbit and Garmin Fitness bands are continuing to see growth in sales, increasing by 30 percent year on year from the same period in 2014. According to Telsyte, Australia has two million smart wristband users. As such, there is a market for Apple to tap into, were it to reduce its prices.

"In some ways, the smartwatch is sitting between smart wristband and smartphone, where one typically has the price advantage and the other is heavily involved in most people's day-to-day life," Alvin Lee, senior analyst at Telsyte, said to ZDNet in a statement.

"The current market demand for wearables is at a lower price point, where we are still seeing strong uptake in smart wristbands. We anticipate the cost of the smartwatch and the amount of unique features or must-have apps will be the key factors driving future demand."

In April, Telsyte stated that the popularity of wearables was such that it had the effect of decreasing sales in tablets.

"The average cost of a smart fitness band is similar to an entry-level tablet, making it a popular alternative purchase for those who already own a tablet," Lee said at the time.

In July, market research from Slice Intelligence showed that Apple Watch sales in the US had dropped from 200,000 per day during the first week of availability to approximately 5,000 per day at the beginning of July. Of these sales, two-thirds were from the cheapest model available.

Telsyte has also provided an update on the state of the Australian smartphone market; like last year, Android has maintained dominance, accounting for 54 percent of the market. The iPhone held 41 percent market share, while Windows Phone accounted for 5 percent.

Sony phones have outpaced HTC handsets, accounting for the third-highest number of smartphone sales after Apple and Samsung.

For the remainder of 2015, Telsyte has predicted that 4.5 million smartphones will be sold, with 3.7 million having been sold in the first half. According to the analyst, 17.2 million Australians -- or 72 percent of the population -- own a smartphone.

"The smartphone market is entering a stage of maturity, with growth starting to be driven by demographic factors such as net migration and births," Lee said.

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