Apple Watch Series 7 deliveries begin on Friday, October 15. The initial batch of Watches will be limited to consumers who pre-ordered a week ago. If you missed the pre-order window, get ready to wait. Our survey of Watch Series 7 lead times from Apple in the US, along with five other countries, shows average lead times ranging from 4-8 weeks. For perspective, in a typical year initial lead times range from 2-4 weeks. The lead times are of course a function of supply and demand. In the case of Watch 7, we believe the extended lead times are in part attributable to tight component supply, and more related to the rising tide of Apple Watch adoption.
Watch Series 7 subtle improvements are measurable
The headline improvement for Series 7 is a 20% bigger screen compared to Series 6 and a display that wraps around the edges. The increased display allows for larger buttons, along with a keyboard that slightly increases the utility of the Watch. Additionally, charging is reported to be 33% faster than the previous edition. Pricing remains the same as Series 6 at $399. Notably missing this year was any additions to the Watch’s biometric tracking capabilities. The foundation of Apple’s health offerings is data captured through the Watch, which today measures heart rate, AFib, blood oxygen levels, ECG, and fall detection. In the future, blood pressure and blood glucose monitoring are logical next features, showing Watch has room to grow as a data collection device.
Good news for Apple investors
Overall, we expect Watch will account for 5% of sales next year, growing at 15% a year. We believe 14% of the iPhone base has a Watch, and that this percentage will increase to 35% plus in the years to come as more biomarkers are added in the next couple of years, including blood pressure and working with third-party blood glucose monitoring applications. If the Watch continues to grow at 15% for each of the next five years, it will be a $38B annual business in 2026. Applying a 5x multiple to Watch revenue suggests the Watch business will be worth $190B. Big potential for a small product.
Masterworks, a Loup portfolio company, recently raised $110M at a valuation north of $1B.
Gene is joined by Masterworks CEO and founder, Scott Lynn, to discuss what becoming a unicorn means for the business of making investing in blue chip art more accessible. P.S. We covered the investing in traditional art vs. NFT topic.
Pandemic or not, food delivery is here to stay. While gross order value and revenue growth rates for Uber Eats and Doordash will decline from an average of 91% y/y in June to 48% y/y in September, the segment still is reporting outsized growth compared to broader tech-enabled industries. To track the services’ value to consumers, we recently completed the second round of our microsurvey around food delivery fees and were left with four takeaways:
- We found the average total meal premium (TMP) for delivery was about 70% compared to 85% in February.
- While food delivery is currently less expensive than we observed in our first survey, it’s the result of temporary promotions to attract customers. It’s an indication of a continued land grab among delivery apps.
- Pricing power matters in an inflationary environment, with evidence from menu pricing at Chipotle versus Taco Bell.
- Delivery is still a wild west, with opaque and inconsistent fee structures across apps.
Promotions to win market share
As a methodology refresher, we made ten identical food orders and did a fee average across three food delivery aggregators: DoorDash, Uber Eats, and Grubhub (acquired by Just Eat Takeaway in June). We then compared it to the price a consumer would pay going direct to the restaurant.
In our most recent survey, we found the average total meal premium (TMP) for delivery was about 70% after adding a 15-20% tip, which we believe most people give. That means a $20 takeout order would cost $34 if delivered. (While our study sample is small and delivery/service fees certainly vary across the country, we believe the basic insights are applicable more broadly. Here’s the Google Sheet with the individual restaurant orders and respective fees).
Believe it or not, this 70% premium is down from an average premium of 85% in our first survey. The lower fees are the result of temporary free delivery promotions, which leads us to believe the premium will widen in the future to 85% plus.
An example of one such promotion, the delivery fee was waved and an additional 15% discount was handed out:
It’s clear these companies are still in land grab mode and are using deep discounts to incentivize orders. We view this dynamic as evidence that food delivery is heading to a commodity service. When a service is commoditized, the competition to win and retain customers through discounts is unforgiving. Moving forward, delivery aggregators will need to differentiate themselves if they are to carve out a profitable piece of the market (DoorDash, Uber and Grubhub have yet to be profitable). One strategy is to land grab for customers and drivers to strengthen a marketplace’s network effects. As the network effects become powerful, driver utilization increases, and delivery times and cost should decline.
Large restaurants are raising prices, local ones are keeping prices stable
Because we captured meal prices in February, we were able to measure how much restaurants have raised menu prices since then. The average meal price increase between February and October was 4%. However, this wasn’t dispersed evenly across all restaurants. Local diners that we checked had largely stable prices. In contrast, Taco Bell increased the price of its Crunch Wrap Supreme meal by 2.5%, McDonald’s raised the Double Quarter Pounder meal by 5%, and Chipotle raised the price of its chicken bowl by more than 10%.
Food delivery is still a regulatory wild west
Inconsistency is a defining feature of delivery apps. For example, we found the tax charge as a percentage of the total meal price varied widely across restaurant and delivery marketplace. For some orders, the tax fee was more than 12% of the total meal price, in others it was only 7.5%. Additionally, Uber Eats and DoorDash continue to charge a temporary “regulation fee” in response to local government regulation capping delivery fees, but Grubhub doesn’t. In short, lack of price and fee transparency is becoming part of the fabric of the food delivery industry.