Exclusive: Apple mines big profits from Watch band

Thu Jun 18, 2015 6:15am EDT
 
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By Julia Love

San Francisco (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, according to data provided exclusively to Reuters.

The data from Slice Intelligence, a research firm that mines e-mail receipts, offers a rare window into the money-making potential of Apple's first brand-new product under CEO Tim Cook.

The ever-secretive company has yet to release how many units of the watch it has sold, let alone how profitable it is. Slice estimates the company has sold 2.79 million as of mid-June.

But if the band purchases are any indication, sales of the watch itself are just the beginning of Apple's profits.

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.

The estimates do not include expenses such as packaging and shipping and may not capture the full cost of the material Apple uses to make the band, said analyst Kevin Keller of IHS.

With the 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, he said.

"Of course, because it's Apple, it's sell the razor, sell the blade," Keller joked.   Continued...

 
Bands for the Apple Watch are seen for sale at Apple's flagship retail store in San Francisco, California June 17, 2015. REUTERS/Robert Galbraith