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Apple Rakes in Big Profits From Sales of Watch Bands: Report

by Reuters /

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Nearly one out of every five 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 company has yet to release how many units of the watch it has sold. Wednesday was the first time customers could pick up and purchase the watch at Apple retail stores.

Slice estimates Apple has sold 2.79 million watches 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.

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 Bands for the Apple Watch are seen for sale at Apple's flagship retail store in San Francisco, California June 17, 2015. Wednesday marked the first time customers could pick up and purchase the watch at Apple retail stores. ROBERT GALBRAITH / Reuters

Slice studies e-mail receipts from a panel of 2 million people representative of online shoppers in the United States, more than 20,000 of whom bought an Apple Watch. Data from Slice, which analyzed only bands made and sold by Apple, showed about 17 percent of shoppers purchased more than one band. Slice says its data lines up closely with information from the Department of Commerce as well as Amazon sales data. The black sport band is the most popular choice for both the band that comes with device and extras ordered by consumers. But the $149 Milanese loop is the second-most popular second band, suggesting many consumers are pairing a practical sport band with a more luxurious option to make the watch more versatile, said Kanishka Agarwal, Slice's chief data officer."People are trying to get two watches in one," he said.

Related: Apple Watch's Hidden Port Could Mean Faster Charging

The entry-level Apple Watch sport model —which starts at $349 — has been the most popular among early shoppers, according to data from Slice. But an extra band — which fetches as much as $149 for the quilted leather loop and $449 for the stainless steel link bracelet — can raise the cost considerably. The popularity of spare bands suggests some consumers may be spending more on the Apple Watch than they intended.

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