Apple could be changing supply and demand/data measurement model with Apple Watch

Even if you have something that looks like it’s going to be a hit, there’s always the risk of forecasting the wrong sales numbers and producing too many units.

Noted analyst and longtime Apple watcher Carl Howe has stated that while he expects the Apple Watch became an overnight multi-billion-dollar business when preorders began earlier this month, he believes Apple will likely minimize its risks and produce units as it gauges demand. This could help handle the question as to which Apple Watch model will prove the most popular, while models might prove less popular and how to wrap production around these factors.

“Building huge inventories of all the models of watches and waiting for consumers to order them risks warehousing large quantities of unsold merchandise. That wastes capital,” Howe said. “Instead, I believe Apple will build a smaller number of watches of each type for store and demo use and then do build-to-order final assembly of the actual cases and bands ordered.”

When preorders began on April 10th, Howe believes that Apple was undertaking an entirely new approach with the launch of the Apple Watch. In his view, Apple is using presale data to determine its final assembly and manufacturing.

Howe’s forecast calls for Apple to ship about 3.1 million Apple Watches in the launch period between April 24 and May 8, when most initial orders are projected to arrive. He expects that 1.8 million of those will be the aluminum Sport, 1.3 million will be the stainless steel Apple Watch, and 40,000 will be the pricey 18-karat gold Edition.

He believes initial sales revenue will reach just over US$2 billion, with the most revenue — US$900 million — coming from the mid-range stainless steel model. And while Apple won’t sell a huge number of Edition watches, he believes it will still represent a half-billion dollars in business for the company.

Howe also believes that the Apple Watch will prove to be Apple’s most profitable product line ever, with gross margins north of 60 percent.

The Apple Watch will officially hit retail stores this Friday, although customers can book try-on appointments either online or in person as select stores.

As always, let us know what you think in the comments.

Via AppleInsider and carlhowe.com/blog