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Thoughts on Apple Watch’s Pricing, Upgradability, and Luxury Positioning

Neil Cybart, at Above Avalon on Apple Watch’s Secret Weapon:

Several luxury watchmakers have given hints that they think a smartwatch’s lack of timelessness guarantees traditional luxury watches will not be threatened by this new crop of wrist gadgets. I’m not so sure that logic will stand the test of time.

The discussions to come after the Apple Watch arrives and sells in numbers (and at prices) alarming to existing watch brands will be focused on luxury as a notion in flux, affected for the first time by technological utility in the form of personalization. Valuing features over the intangible lies in opposition to the definition of luxury, but the wrist may be where the two worlds come together. After all, you can only wear one watch at a time, and a smartwatch’s absence from one day to the next is glaring once its features have become habit. Apart from providing large margins for Apple, the Edition watch exists to allow luxury watch customers the  benefits of a smartwatch. It opens the door of their resistance a crack, but won’t debut in a position to steal meaningful profit share, which is the real danger to a complacent luxury watch industry — it’s a time bomb with years on the clock.

The post concludes with the suggestion that a hypothetical $7,500 Apple Watch Edition will not be designed to last long; predicting that it will not be upgradable as some have suggested it needs to be. In other words, its class of buyers (inference: rich, Chinese, digitally savvy, all of the above) will get a new one every few years despite the price. Despite being made of solid gold, you will not buy one as an investment or potential heirloom.

I don’t think Cybart backs up this assumption very well, leaning largely on the cottage industry that has sprung up around customized gold and wood iPhone 6es, but I am inclined to believe in the same outcome: success whether Apple Watches are upgradable or not, although my personal preference would be for upgradable, owing to the size of my wallet.1

That they’ve announced the opening price of an Apple Watch Sport at $349 signals a belief that it will be a significant mass market seller, regardless of its sporty positioning. A large group of people will choose the Sport version because they want an Apple Watch/are curious, and it’s simply the one within their reach. If the price difference between the Sport and the standard model were relatively insignificant (say, $349 vs. $499), they would probably have announced the standard pricing too. That they didn’t, could suggest a belief that pricing is less relevant in the decision making of Apple Watch and Apple Watch Edition customers.

My guess is that the standard model will be in the range of $800-1200, possibly upgradable for at least one future generation, and the Edition model will be easily upwards of $8000 and upgradable as well. As a point of differentiation, I expect the Sport models will not be upgradable.

I’d like to believe that the straps and their locking mechanisms are also designed to be used for many generations of Apple Watch, which would mean dimensions such as the thickness of the case will be stable for years, but we’ve seen Apple revise accessories/standards without hesitation if it means allowing a better product to come to market. Hence, I wouldn’t be surprised if a third-generation Apple Watch mandated all new straps.

In terms of mix, I’d wager an approximate 60% Sport, 30% Apple Watch, and a maximum of 10% Edition in the first year. At the prices above, the 10% sales of Edition watches will probably drive half the overall revenue.

But I could be wrong about upgrades. In conversation about this a few months ago, as part of an office podcast we’re still trying to get off the ground, I recall speculating that the Chinese luxury factor could be bigger than anyone expects right now. It’s well known that tens of thousands of dollars are nonchalantly dropped on leather bags and other so-called Veblen goods on a regular basis by Chinese customers, and this no doubt includes timepieces costing 10x more than Apple would ever charge for an Edition watch. If the Edition series was expressly designed to take advantage of conspicuous consumption in China (in volume, followed by the rest of the world), then we’ll see it when they announce that the watch cannot be upgraded, and is inherently disposable. What’s flashier than wearing a gold watch that says you can afford to get a new one every year or two?


  1. As I understand it, the recent release of WatchKit details suggested that almost all processing in Watch apps will take place in the CPU of the companion iPhone, not the Watch’s S1 processor. But in a release of the software scheduled for late 2015, the Watch will gain the ability to run native apps. The delay may be down to the software not being ready now, although the shipping hardware may already be equipped to handle it. But it’s hard to believe this later update won’t lead to a degraded experience such as shorter battery life. Having the option of bringing a new and expensive Apple Watch in for a relatively low-cost hardware upgrade in early 2016 seems like a fair proposition. This could mean an annual tech refresh cycle, but a biennial hardware (body) cycle. 

2 Comments

  1. Pingback: Apple Watch Numbers | sangsara.net

  2. Pingback: Apple Watch Numbers and Ive’s Materials | sangsara.net

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