Apple Is Not Focusing On Luxury

The pricing of the gold Apple Watch Edition tells us that Apple is not focusing on luxury. Instead, they are focusing on fashion.

First read Benedict Evan’s great post on why Apple is making a gold watch.

Apple retail is a self-funding marketing operation. So too, perhaps, is the gold watch. Apple might only sell a few tens of thousands, but what impression does it create around the $1,000 watch, or the $350 watch? After all, the luxury goods market is full of companies whose most visible products are extremely expensive, but whose revenue really comes from makeup, perfume and accessories. You sell the $50k (or more) couture dress (which may be worn once), but you also sell a lot of lipsticks with the brand halo (and if you think Apple’s margins are high, have a look at the gross margins on perfume). 

His argument is that Apple created a gold watch for marketing purposes. They aren’t really serious about selling you a gold watch, and they don’t care if they don’t. They care that it’s on the cover of Vogue magazine and lots of people talk about it.

This would have been different if Apple had made the price of the gold Edition something like 5,000 USD. Then there would be normal people buying it and the volumes would be pretty high. High enough to make a significant contribution to total sales of the Apple Watch.

Horace Dediu for example was predicting something like 5,000 USD. That probably would have been the correct price if Apple was trying to optimise for revenue and profits. John Gruber predicted 10,000 USD which was still very far off from the actual 17,000 USD. In his case, he was simply pricing based on competitors; competitors whose gold watch prices aren’t optimised for revenue generation either.

The aluminium and stainless steel versions are very affordable

So now that we’ve got the gold Edition out of the way, we can turn our attention to the aluminium and stainless steel versions at $349 USD and $549 (for the non-sports band Watch). These are very affordable, especially for a high-build quality tech product. They are iPad prices. Although they are only a bit more expensive then Swatches or Casio G-Shocks, they are in the same range as Fossil watches.

And anyone suggesting that these are luxuries or jewels is simply confused. They have been blinded by the gold Edition, which is probably exactly what Apple intended. Fashion is a much better way to describe them.

One important thing to note is that if you wear a Swatch on casual occasions, then in many cases, you will also wear a separate watch for more formal ones. However with the Apple Watch, you are expected to wear the same watch at all times, switching bands to suite the occasions. Since the bands for Apple Watch are also quite affordable, this is easily within the reach of normal fashion enthusiasts.

Apple is not focusing on luxury

It should be very clear by now that Apple is not focusing on luxury. If they were, then they should at least have 5,000 USD luxury models that they can sell at meaningful volumes. Instead, the only models that Apple is serious about selling in volume are much cheaper. They are priced not at luxury prices, but fashion prices.

What does it mean for Apple to focus on fashion?

Apple in many ways has always been somewhat fashion minded. They have always made computers that look very nice, and with the iMac G3 lineup, they had a variety of colourful bodies to choose from. Even the current iPhone lineup has three colours to choose from.

Apple has also attracted the attention of a large number of case manufacturers, many of which who provide very fashionable designs. There is an abundance of fashion surrounding Apple’s offerings.

Apple has always been focused on fashion. Nothing has changed.