Financial Times: Apple Tests Luxury Appeal With Gold Watch
By Tim Bradshaw, March 6, 2015
Some models will also be Apple’s most expensive products in more than 30 years. The company is widely expected to put a price tag of at least $10,000 for the gold Apple Watch Edition when it shows off the devices at a press event in San Francisco on Monday.
According to the details released so far, the premium device will offer no additional features or functions above those in the aluminium Apple Watch Sport, which starts at just $350.
Yet the volume of gold alone in the new device’s 18-carat casing and buckle will make it Apple’s priciest gadget since the Lisa, a $10,000 computer released in 1983. The high-spec Lisa, which took five years to develop and was overseen by Apple co-founder Steve Jobs, sold just 100,000 units and is seen as one of the company’s rare flops.
Apple Watch is the first new product category to emerge from the company since Jobs’ death in 2011. Its ambitious pricing and luxury styling shows how Mr Cook and his design chief, Sir Jonathan Ive, hope Apple can transcend Silicon Valley to enter the more prestigious and lucrative worlds of fashion and jewellery.
“I do see that the Watch is a move away from what is traditionally understood as consumer electronics,” Sir Jonathan said at a conference last year.
“Apple has always been about ‘affordable luxury’: at the higher end of the price range and with a premium feel, but it’s always been within reach of the ordinary consumer,” says Jan Dawson, technology analyst at Jackdaw Research. “This is the first time that Apple has moved into straightforward luxury.”
Previous attempts by tech companies to sell mobile devices for thousands rather than hundreds of dollars include BlackBerry’s Porsche Design range and Vertu, the former Nokia mobile phone division sold to private equity firm EQT in 2012.
“This idea of trying to crash into the fashion space with technology is one that works for very few,” says Ethan Imboden, who works with tech start-ups at frog, a design company.
Vertu made its name peddling bling to the nouveau riche but its latest models eschew gold and diamonds for a more understated luxury look, using materials such as ostrich leather.
Yet even for many who could afford Vertu’s pricetags, the iPhone’s allure has been stronger — even though the gold colouring Apple introduced to its smartphone in 2013 was merely superficial.
“The Vertu experience teaches us that bling itself is not enough,” says Mr Dawson. “They weren’t fantastic phones in the first place.”
He suggests that Apple is better positioned because its brand is already an aspirational one, despite selling a decidedly mass-market 75m iPhones in its last quarter alone.
However, some see the Apple Watch Edition’s rich pricing as an over-reach that could backfire.
Christian Madsbjerg, co-founder of ReD Associates, a consultancy that counts Samsung and Adidas among its clients, argues that Apple risks making the same mistake Louis Vuitton did when it tried to increase prices of its luxury bags for upmarket customers in China and Russia.
“We call this the ‘rich people are dumb’ strategy,” says Mr Madsbjerg, who predicts it is “not going to be successful” for Apple. “They’ll sell a couple in some places but it’s not a sustainable strategy because rich people are not stupid: they start asking, ‘Why should we pay so much more?’”
One potential obstacle to success is the rapid obsolescence of any technology. While luxury watchmakers pitch their timepieces as future heirlooms, people familiar with Apple’s plans say the next version of its smartwatch is already in development, due for release next year.
A gold watch’s high margins might impress Wall Street, which has driven Apple’s market capitalisation above $750bn since it reported the highest net profit in US corporate history in January, but not other potential Watch buyers, Mr Madsbjerg argues.
“It alienates your core when you become too focused on quick money in Asia,” he says.
Others take quite the opposite view: that a luxury gold watch will light a halo around its more affordable siblings. “It changes my perception of the purchase I’m making,” says frog’s Mr Imboden, especially if it makes $1,000 for a steel model seem reasonable.
For some high-end customers, even $10,000 is a small price to pay for a watch; the fact it will be obsolete in two or three years merely adds to the ostentation of its purchase.
“They know if you buy a gold Apple Watch that it’s not going to be a long-term investment,” says Ariel Adams, editor of luxury timepiece site A Blog to Watch. “They just want to show off.”
Having a gold option among Apple Watch’s many interchangeable straps may also appeal to more fashion-conscious customers, says Mr Imboden, allowing them to personalise an intimate device that will probably sell in the many millions.
“Fashion for many is a means of individuality and self expression,” he says. “From a design standpoint it sends what I think is an appropriate message: we use gold for jewellery, there is a tradition in that, so [Apple] aren’t going to give you fake gold.”
In the past two years, the company has assembled a team of luxury industry professionals, including former Burberry chief Angela Ahrendts, Paul Deneve from YSL and designer Marc Newson, to help it understand the dynamics of Vogue and Paris Fashion Week, where the Watch has already made appearances.
“I’m much more concerned about how we can make them as good as possible than how many we’ll sell,” Sir Jonathan, Apple’s top tastemaker, told the Financial Times’ How To Spend It magazine in an interview.
But as Mr Cook looks to the future, the gold Apple Watch Edition may merely be testing the depth of his customers’ wallets as it researches an even higher priced product: a car.
“They’re already considered the luxury brand of consumer electronics,” says Mr Adams. “They feel [a premium-priced watch] is a natural step in the direction that they want to go in. Other brands would do it if they could.”
This article originally appeared on FT.com.