Can the Enterprise Prop Up Apple Watch Sales?

By Evan Niu,

Give investors some Apple Watch figures, Tim. Image source: Apple.

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The smartwatch market is at a critical inflection point right now. Unit volumes are plunging, just a year after Apple (NASDAQ: AAPL) jumped in with Apple Watch. Mainstream consumers aren't really sold on the idea quite yet, especially if they don't place much value on fitness-oriented functionalities. Maybe the enterprise can pick up the slack?

Apple has now launched a new Apple Watch microsite dedicated to corporate wellness, highlighting how companies can improve employee health with the wearable device. The site features a handful of health apps, as well as productivity apps. The volume discounts appear to kick in at 100 employees, at which point enterprise customers should contact Apple directly. Companies with less than 100 employees are told to just visit an Apple Store.

This comes just a couple months after Apple scored a major Apple Watch win with Aetna, which now offers Apple Watch to its 50,000 employees as part of its own corporate wellness program. On top of that, Aetna will help subsidize the device for several large employers that it works with.

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But will they upgrade?

It's somewhat uncharacteristic of Apple to target the enterprise, and the company has only really been actively catering to the enterprise for a couple of years now. The Mac maker has never really liked appealing to a purchasing manager or high-level exec that's responsible for buying in bulk. It would rather sell directly to individual users. That being said, Apple is always happy to have the business, even if the enterprise historically hasn't been a priority.

That's also a challenge, particularly when you're asking consumers to adopt a new product category. Sure, it's nice if a company buys employees Apple Watches, but that doesn't necessarily mean they'll use them. And much of Apple's business is predicated on customer satisfaction driving ongoing hardware upgrades over time. A corporate wellness win could produce a spike in Apple Watch unit sales, but that hardly ensures the customer will jump on the upgrade track.

Every little bit helps

In the U.S. alone, companies spend an estimated $6 billion per year on corporate wellness programs, according to IBISWorld. This market will only expand as companies seek to reduce healthcare costs, even with uncertainty surrounding the fate of Obamacare. Grabbing part of that market would certainly help, but it takes a lot to move the needle for a $215 billion business.

CEO Tim Cook recently attempted to assuage investor concerns about Apple Watch, but unfortunately those reassurances fell flat since Apple still doesn't disclose any meaningful detail surrounding Apple Watch's financial performance. Apple Watch can use all the help it can get right about now.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on 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.