Are Apple's Stores the Biggest Threat to Apple Watch?

Apple Watch looks to be off to a rousing start, with orders for delivery on the initial shipping date selling out in about 30 minutes, according to MarketWatch.

However, as least in the short term, new research suggests the company's relatively small number of retail stores could limit how many units it moves. Since the watch -- and wearables in general -- is a new category, the company's best chance at selling it to skeptical consumers is having well-trained Apple Store staff members demo the devices.

"Friendly, helpful Geniuses demystify the latest technology. Sleek, subtle design elements help sell millions of smartphones, tablets, and computers," stated Consumer Intelligence Research Partners in a commentary recently released to the press. "Apple confronts inherent limits in selling new products, such as the Apple Watch, through this retail enterprise."

The problem isn't that Apple's retail locations aren't excellent. CIRP conceded that they do a great job in moving the company's high-priced merchandise. The problem is that there might not be enough of them.

How big is this problem?Apple has 256 stores in the United States and 435 across the world.

"Only so many units can pass through a given location each day," wrote CIRP. "A significant percentage of consumers even iPhone owners do not live near an Apple Store."

The company, of course, uses other retailers to sell iPhones, Macs, iPads, and various accessories, but at least at first, the Apple Watch is only being sold in the company's own stores.

"Some observers call this a calculated attempt to drive more customers into Apple Stores, where they can eye new iPhones, iPads, and Mac computers, and perhaps buy an Apple TV," CIRP wrote.

That could be true, but using interest in the watch to push traffic into Apple retail stores may backfire. Yes, Apple might sell a few more Macs, iPhones, and iPads, but it could greatly curtail watch sales. Because the device is not just a new model, but an entirely new category, Apple could be making a mistake by not putting it in as many stores as possible.

It's one thing to order a new model of a phone or tablet online, but many customers will likely want to handle and try on the Apple Watch before buying it.

Why is Apple doing this?The company might not trust its retail partners to properly sell the watch. That could be because on a per-store basis Apple sells far more of its products than any of its retail partners.

That's likely due to a combination of customers making the pilgrimage to an Apple Store as sort of an event to make a major purchase and the ability of the company's dedicated, trained sales associates to sell Apple products. It's possible Apple believes its partner retailers won't be as capable in pushing the watch.

In 2014, Apple Stores and its website accounted for 12% of all U.S. iPhone sales, according to CIRP. That sounds like a small number, but when you consider the thousands of stores owned by retail partners including Best Buy, Wal-Mart, and the now mostly defunct Radio Shack, as well as AT&T, Verizon, Sprint, and T-Mobile, it's a stunning figure.

Among other products, Apple Stores sold 18% of all U.S. iPads, slightly behind Best Buy (which has over 1,000 U.S. stores), while other retail outlets divided the remainder of the domestic market, according to CIRP. Apple Stores last year sold 43%of all Macs in the U.S. This makes sense given that their high price relative to the other products makes it more likely people would buy them from the most knowledgeable source, which is clearly the Apple Store.

Source: CIRP.

Apple has a problem (sort of)The company's small retail footprint does seem likely to limit how many Apple Watches it can sell, at least until smartwatches as a category become as familiar as phones and tablets. It's hard to picture too many people wandering into a Best Buy or a Wal-Mart and buying a high-tech watch that starts at $349 but can be much more expensive.

Of course, Apple is carefully controlling supply and demand for the new watch. It sold out its initial run quickly, but MarketWatch noted that demand is steady, not exploding.

"We believe that the current stable lead times suggests that supply was the main limiting factor in this morning's sellout as if demand were extremely strong, it would seem that lead times would continue to increase," wrote analyst Gene Munster at Piper Jaffray, the website reported.

Apple is very likely keeping the watch in short, but reasonable supply as a way to create buzz. Ultimately, when all the early adopters have been satisfied, it will be time to reach on-the-fence customers and those who need to be convinced. At that point, the limited number of Apple Stores could stop -- or at least slow -- Apple Watch from becoming as successful as the rest of the company's product lines.

The article Are Apple's Stores the Biggest Threat to Apple Watch? originally appeared on

Daniel Kline owns shares of Apple. The only watch he owns is of the pocket variety. The Motley Fool recommends Apple and Verizon Communications. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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