The abysmal Smartwatch market

Independent research company Smartwatch Group provided new data to AppleInsider on Wednesday estimating that just 6.8 million smartwatches were sold last year. Those devices had an average price of $189, which is down 16 percent from the selling price of $225 seen in 2013... Total market volume in 2014 was $1.29 million, up from $711 million in 2013. Overall unit sales, however, increased 82 percent year over year.
— AppleInsider

Though these are early days for the Smartwatch market, Smartwatches (as we know them today) have been around for at least a couple of years as of now. So it is a reasonable time in their history to analyze their market a little. Looking at this article from AppleInsider, it is easy to conclude that there is no way Apple is going to compete in this market. The ASP is so low at $189  and that too already racing to the bottom from last year with a 16% decline. Though the overall unit sales almost doubled in 2014, there were only half a million of them sold every month last year (for perspective Apple sold almost the same number of Macs, 5.5million of them, in just last quarter at an ASP of $1258). Though the article doesn't have any profit margin info, how much profits can you make from a category that has an ASP of less than a couple of hundred bucks? Hence there is no way Apple is competing in this abysmal category, correct? Wrong!

Apple will start selling its Apple Watch in approximately a month from now and its starting price will be almost twice this average ASP of the market at $349. Its highest price is rumored to be 100x this average ASP at around $20,000. So the argument that "this market (without taking Apple into account or before Apple's entrance) is not making enough money", will and has never stopped Apple from entering it! Just like it might not stop the rumored Apple Car, many other arguments might, but defintiely not this one!