It’s no secret that Apple’s launch plan for the Apple Watch hasn’t gone as well as the original iPhone and iPad launches.
Extremely limited supplies have led to long wait times for pre-orders. The lineup of choices is so complex that the company needed to give people weeks to try them on in stores before they were supposed to be available. And the confusing online-only purchase process advertised in Apple’s retail stores didn’t initially disclose that stores won’t have any units in stock on launch day. No part of the process has thrilled potential customers.
Yesterday, Apple’s SVP of Retail Angela Ahrendts sent an internal video memo to employees about the Apple Watch rollout in an attempt to help answer questions and assuage concerns about the many issues plaguing the launch, not the least of which is the lack of a “blockbuster launch” at retail outlets that customers and employees alike have come to expect from Apple. Some people took the video as an admission of guilt by Ahrendts. But although she may share responsibility for some of Apple’s missteps, she isn’t solely or even largely responsible for the issues.
Here’s where I believe things fell apart during this launch…
The Retail-Free Retail Experience
As I mentioned above, Ahrendts does share some of the blame in this situation, but not the bulk of it. She had no control over problems such as supply shortages, and it seems that she has done her best to make lemonade of the lemons she was given.
The two-week try-on period in Apple Retail Stores starting on April 10th gave customers a chance to figure out exactly which models they wanted to buy before placing pre-orders. This has never been done by Apple before, and seemed like a good idea at first. However, the process may only have served to confuse many customers about how they would be able to buy the Apple Watch.
Think about it: customers go into an Apple Store to test out a product. There are devices in the store to try on. On April 24th—the launch date advertised by in-store banners—many of them would naturally show up to get the first units, only to learn that there are none available for purchase.
Of course, it falls to individual retail employees to explain to customers that they cannot buy the device in retail stores during the try-on appointments, but there would certainly be a significant number of people who didn’t get the memo, whether it’s because they tuned out while the Specialist was talking or because their Specialist simply forgot to mention it.
So while Ahrendts may have made some poor choices in how the retail side of the process would work in order to accommodate limited supply, the real problems originated elsewhere.
Misleading Marketing Materials
Those retail banners trumpeting the April 24th release date mentioned above didn’t create themselves. Apple reportedly spent $38 million between its March event and the beginning of April on TV spots, print ads, and other publicity that proclaimed the Apple Watch’s April 24th street date… and very little else.
Were any of those dollars were spent educating interested customers on how to buy one? Did a single ad mention that you wouldn’t be able to purchase your watch at the Apple Store? Was even one line of fine print dedicated to informing customers that they’d need to pre-order online two weeks early if they actually wanted a snowball’s chance of getting a launch day model… or even getting their hands on one before June?
The answer to those questions is a resounding “no,” and it’s this lack of information in marketing materials that is partially to blame for customer confusion surrounding the device’s launch.
Apple’s marketing team should have made sure that ads were clear about the fact that people would need to buy their watches online: “try at our stores, buy with your iPhone.” After all, the whole purpose of marketing is to get people to buy a product. Confounding customers with an opaque sales process doesn’t help achieve that goal.
In what amounted to a tacit admission of this point, Apple quietly removed marketing references to April 24th from its website on April 15th, but by then the damage was done. TV commercials and physical signs were still hyping buyers up for a day of disappointment.
Weak Link in the (Supply) Chain
The supply chain has an especially critical role during a high-profile launch in a brand new product category. When launching the iPhone 6, Apple faced big setbacks in sapphire crystal production that prevented the manufacturing of displays for the smartphone. Even so, the company managed to both fill a large number of pre-orders and have stock available in stores on launch day.
In March, reports started to surface that Apple had cut its 3 million-unit watch order in half due to bottlenecks with LG’s display panel supplies. At the time, many people (myself included) had hoped that Apple was simply planning to rely on other suppliers to round out that order, but as we close in on launch day it has become evident that this was not the case.
KGI estimates that Apple sold 2.3 million watches during the pre-order phase. Had LG been able to fill the initial order of 3 million units, it seems likely that Apple would have been able to comfortably keep up with pre-order demand. However, most models sold out within just hours of going on sale, and some shoppers will now be stuck waiting until June or later to get their April pre-orders.
In order to ensure that as many app developers as possible are able to get their devices on time, Apple has had to resort to offering a special lottery that gives some randomly selected software makers a chance to get an expedited base model. This shouldn’t have been necessary.
Apple has an operations team dedicated to managing the supply chain and attempting to ensure that a situation like this doesn’t occur, but it seems that team was unable to predict or properly adapt to LG’s failure to meet demand.
It can be argued that Tim Cook, as CEO, may take credit for every Apple success and must take blame for every Apple failure. In this case, however, I don’t think Cook should take the blame just because he’s “in charge.”
Before he became Chief Executive, Cook served under Steve Jobs as Chief Operating Officer. He has been hailed as an “operations whiz,” a “genius,” and a “business-operations maestro” by Fortune. He “excelled” at logistics, according to Bloomberg. He is credited with single-handedly reforming Apple’s supply chain in 1998. He was hired away from Compaq exactly for that purpose.
So how on earth did the man who has been praised as a master of the supply chain for his entire career allow such a massive supply chain failure to take place?
We’ll likely never get a straight answer to that question. Unless he changes tact, Cook will read dutifully from his script when investors ask how things could have gone so sideways during next Monday’s earnings call, assuring everyone listening in that previous products have met with some delays as well, and everything will return to normal soon.
It’s true that the iPhone 6 and 6 Plus faced supply constraints and shipping delays at launch, but it’s also true that a far greater number of people were waiting to get their midnight pre-orders in for the phone. Apple announced that a record 10 million iPhone units were pre-ordered during the device’s opening weekend. Compare that to the aforementioned 2.3 million Apple Watch pre-orders estimated by KGI, with roughly 85% expected to be the low-end Sport model.
This is the first new product category that Apple has entered since Steve Jobs unveiled the iPad in 2010, and arguably the most important moment of Cook’s career thus far. Yet what should be a triumphant moment for the world’s most valuable company has instead left it playing defense as a series of embarrassing failures on all fronts culminate in the most lackluster launch Apple has faced in years.
Who Got It Right?
Obviously there’s a lot of blame to go around for how things are playing out with this launch, but it’s important to remember that there are also a lot of people who had nothing to do with these decisions and who are trying their hardest to make the best of the situation.
It could be argued that Apple’s Communications team is also to blame for sending out press releases that contained the April 24th date, but a look at the company’s April 9th press release shows that the PR department was one of the few groups to come close to fully explaining the release process. A March 9th release goes into a bit more detail (emphasis added):
Beginning April 10 in Australia, Canada, China, France, Germany, Hong Kong, Japan, the UK and the US, Apple Watch will be available for preview, try-on by appointment at Apple’s retail stores, and available for pre-order through the Apple Online Store (www.apple.com). On April 24, Apple Watch will be available online or by reservation in Apple’s retail stores and select Apple Authorized Resellers in China and Japan.
Perhaps the sentence about “Apple’s retail stores and select Apple Authorized Resellers in China and Japan” could have clarified that the entire statement applied solely to China and Japan, not just the “Authorized Resellers” part, but this is still the closest thing we’ve seen to a full statement on availability.
The people managing the technical side of the Apple Online Store also deserve a reprieve. They were able to get it back up on time for pre-orders (versus an hour late with the iPhone 6), and kept it online for the entire night (though the lighter load may have helped a bit). Even though there wasn’t enough stock to go around, the online store team managed to make the pre-order process as smooth as possible for those who took part.
There’s another group that will likely catch a lot of the backlash for these problems: Apple Store employees. The Specialists and Geniuses at the Apple Store are often the only real exposure customers have to Apple as a company. Those employees were likely just as confused as you regarding in-store stock on launch day and other questions, if Angela Ahrendts’ video is any indication. Cut them some slack; there’s a good chance that they, like you, will still be waiting for their Apple Watches to arrive.