Maybe Apple, Inc.'s AirPods Aren't Doing As Well As You Think
January 17, 2017, 01:01:00 PM EDT By Evan Niu, CFA, Motley Fool
Image source: Apple.
Last week, e-commerce analytics tracker Slice Intelligence   estimated that Apple (NASDAQ: AAPL) was already dominating the market for wireless headphones , thanks to the launch of AirPods in December and supplemented by   Beats' existing strong position in the market. Specifically,   Slice was estimating that Apple was grabbing an impressive 40% of   the wireless headphone market between AirPods and Beats combined.   If that sounded too good to be true considering the severe supply   constraints that AirPods are currently suffering from -- well,   maybe it really was.
Survey says
Market researcher NPD has now released some data that   questions Slice's estimates (via CNET ). According to NPD's data for December 2016, Apple currently   only has 2% unit share of the wireless headphone market, while   Beats has 25% unit share. Given Apple's premium pricing for both   products and brands, that translates into 3% revenue share for   AirPods and 46% revenue share for Beats. Here's how some of the   other top players fared for the month, ranked by revenue   share.
Company/Brand
3%
Data source: CNET.
For reference, NPD estimates that a year ago in December 2015,   Beats was able to grab 24% unit share and 49% revenue share,   comparable performance to this time around; Beats' strong   position in the premium headphone space was one key reason why   Apple acquired the company. More importantly, Beats was able to   maintain its position even as the market has been evolving and   shifting toward wireless Bluetooth headphones, so Beats is   keeping up with the times.
Why the difference?
That's a pretty drastic discrepancy between Slice's numbers   and NPD's numbers for AirPods -- 26% compared to 3% in revenue   share, respectively. There are a few possible explanations.
For starters, Slice only looks at online sales and its   methodology revolves around analyzing e-receipts that are   aggregated from a panel of over 4.4 million online shoppers (the   sample sizes for Slice's estimates ranged from about 2,900   shoppers to over 350,000 shoppers). NPD, in contrast, also   includes brick-and-mortar sales along with online sales, which   should provide a more comprehensive view of the market. While   e-commerce has been growing for years, brick-and-mortar retail   still comprises a meaningful chunk of the market, so ignoring   that part of the market can lead to some faulty conclusions.
Additionally, given Slice's methodology of tracking   e-receipts, it's not clear how unfulfilled orders are treated.   It's possible that Slice picked up on a surge of online orders   following the launch, but AirPods are still suffering from severe   supply constraints and new orders don't ship for six weeks. It   seems conceivable that a lot of the sales that Slice is tracking   may not be filled yet, and only tracking e-receipts could   artificially inflate the figures even if many of those customers   haven't actually received their products.
Still impressive
Here's the thing: Even if investors go with NPD's far more   conservative figures, it's still an impressive debut for AirPods.   Keep in mind that AirPods launched in mid-December, and yet   despite constraints and only being available for half of the   month, they were able to grab 2% unit share and 3% revenue share   in a fairly large market. And those numbers only go up from   here.
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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. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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