Apple's High-Tech Spin on the Razor-Blade Business Model is Paying Big Profits with Apple Watch Bands
With Apple Watch, Apple has put a high-tech spin on the razor-blade business model, in which a company sells a product for a modest price and then profits from sales of accessories. According to Reuters, "nearly 20 percent of Apple Watch buyers are not only shelling out hundreds of dollars for the timepiece but are springing for a spare band too, giving the tech giant a profitable second dip into customers' wallets."
Although the entry-level sports band retails for $49, it costs only about $2.05 to make, according to an analysis of the 38-millimeter size by IHS, a technology research firm. Of course that doesn't include the full material costs, but even if the cost is $5 to $8, the profit is tremendous.
The data from Slice Intelligence, a research firm that mines e-mail receipts, states that "The black sport band is the most popular choice for both the band that comes with device and extras ordered by consumers. But the $149 Milanese loop is the second-most popular second band, suggesting many consumers are pairing a practical sport band with a more luxurious option to make the watch more versatile, said Kanishka Agarwal, Slice's chief data officer." He added that "People are trying to get two watches in one." For more on this story, read the full Reuters report here.
Lastly, it was reported that Slice estimates that Apple has sold 2.79 million as of mid-June. It should be noted that Slice states the following in their website: "Slice Intelligence data comes from several sources, including the receipts in the e-mail inboxes of consumers who use the popular Slice online shopping service, Slice, and through strategic partners, including users of Slice’s API platform. Each e-mailed receipt contains a treasure trove of data, all of which Slice extracts, parses and measures, using our proprietary Merchant Template Management (MTM) technology." So the sales figure of 2.79 million may not represent a true or full picture of Apple Watch sales.
Side Note: Apple's patent applications have yet to be published by the U.S. Patent Office as of 4:50 AM MST.