The $17,000 Apple Mistake

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The Apple Watch, supposedly the next big thing in technology, got the world exited. This is revolutionary because you can finally check the time by looking at your wrist instead of your phone. April 24, 2015 is the release date and I assume people are already camping outside the Apple store at the moment of this writing. Consumer addiction to Apple products makes it the biggest publicly traded company in the world with a market cap of $726 billion and $74.5 billion in revenues just last quarter alone (you read it right, one quarter). Apple is one of those special company that seems to hit all the right notes. Apple makes great innovative products, both hardware and software, has an amazing brand, and is in this nirvana stage where consumers can’t stop throwing money at them. It’s rare that the public is so in love with a mega rich corporation after milking them for so long. It’s probably related to the sentiment that Apple tries to make the world a better place, as long we don’t talk about the working conditions behind your iPad or the source of its rare earth minerals. There’s definitely a business case study here.

It has been a while since Apple has released a new product line; the first under Tim Cook if I’m not mistaken, because since Steve Job’s passing Apple has just been releasing larger iPhones in different colors. The Apple Watch prices start at US$349 and go all the way up to US$17,000, a very wide range (or 50% off if you are employee). For the full gallery click here. We obviously know that buying a watch has nothing to do with knowing the correct time; if it did we would buy a $5 Casio.

There’s no doubt in my mind the watch a great product with awesome innovation. It even looks nice too. I’m sure they will sell millions and make the shareholders even richer. But the Apple Watch falls into the gadget category, not in the luxury watch segment. The $350 Apple Watch, I get it and it will sell. The $17,000 gold Apple Watch, I don’t get it and I’m not alone. When I talked to other people about the high-end 17k watch, their first reaction is not “omg it can’t afford it” but it’s “wow that’s stupid, who’s going to buy that?” It’s probably one of the rare bad decision Apple made (with Apple Map and free U2) and it will not succeed in the luxury watch market. You can’t be a mass consumer product company and pretend to be Bentley at the same time.

A fine luxury watch is cool, classic, and never goes out of style. A high quality watch is a timeless collectible piece of micro-engineering. A watch remains a status symbol, and an important asset. A legacy watch is supposed to project success and lust, not douchiness. The kind of asset that keeps its value over time and that you might want to pass on with pride to your grand-children one day. I can’t picture myself donating the Apple Watch as part of the family heritage in 50 years or so. Imagine kids in fifty years wearing their grandpa’s first gold Apple watch (Which would answer the question of what I did with their college money.)

Gold Apple Watch 17k
The most expensive Apple Watch, $17k.
A Rolex Oyster Perpetual Datejust, ~$10-13k, it doesn’t need daily recharging.

First it’s a gadget, a toy, something cool to have, at $350, not $17k. Wearables are the trend right now. I had a Fitbit for about a month, after a while you get the idea how many steps you take in a day (or lack off). Apple has adopted a weird marketing strategy too. I think the idea was to create an air of luxury around all the Apple products but I believe instead you are making all the other Apple products feel cheap. “Oh is that the $350 model you have?” The opposite is true too, that’s why Rolex doesn’t sell $75 watches; it just cheapens the rest of their line. Volkswagen, the “people’s car”, tried this strategy once by releasing a $100,000 car, the VW Phaeton, and their slogan was something along the lines of “Finally a Volkswagen for people with money”. Well you pretty much insulted everybody who owned a Volkswagen. I just googled the VW Phaeton and it turned out to be a major flop and it’s still for sale in Europe. At $100k it probably comes with an iPad.

Second, it’s the cost. How does Apple justify a $17k watch? It has two ounces of gold, 18-karat. This morning gold was trading at about $1200 an ounce. So let’s say $2400 for the gold plus $350 for the watch, that adds up to $2,750. Let’s also assume you are getting a nicer bracelet, extended warranty and with all the bells and whistles it sums up to $4,000-5,000$. Where’s the other 12k? I don’t know but I have a feeling I will see it on the bottom line. I compared the specs between the $350 and the $17k watch, and aside from the luxury component it has all the same specs and functions. Botch watches have the same Bluetooth, battery, water resistant, speaker and microphone, heart rate sensor, and same apps. But one watch has more bling.

For full swag, just replace those watches with the Apple Watch.

Third, shopping for and buying a luxury watch should be an experience. I’m not going buy a $17,000 watch online. I buy shoes online and pay my bills. Not 17k watches. I’m also not going to buy a $17,000 watch at Best Buy or the Apple store. If you are going to splurge some mad cash, go to the luxury watch boutique and you are accompanied by a professional watch expert with a background in jewelry and maybe in horology (art of studying time, a maker of watches or clocks). With all the respect I have for Apple employees, I just can’t picture the kid in a blue t-shirt at the crowded Apple store selling me a 17k watch. When shopping online at the Apple store for a gold watch the first thing they ask me is my strap size then add to cart. But keep in mind that it comes with free shipping and chat assistance in case you need help with transferring your contacts.

The problem with luxury is that you can’t mass produce it. Luxury is a function of desirability and desirability is created when you can’t have something. People want a Ferrari because there’s a 20-month waiting list. That’s desirability. I have it and 95-99%% of people can’t. That’s exclusive. The Apple Watch doesn’t project that. The Apple Watch is mass produced by Quanta Computers in Taiwan, pretty much a modern-day sweatshop with 40,000 employees. I doubt the employees all went to Switzerland to learn the craftsmanship behind luxury watches. If Ferrari drops the price of their car to $30,000 for everyone, it will be the day the brand is killed. The fact you can’t have it is what’s keeping luxury brands alive. Now that I can go on the Apple website and add a 17k watch to my cart kills the “luxury” concept. There’s no prestige!

Apple douche bag

Longevity. A good watch will last for generations and very often the older the better. If you are lucky the Apple Watch will last maybe five years then it will become obsolete once the next generation comes out. “Uugh! look at this old Apple Watch, can you still get your horoscope?” Maybe you will be able to salvage the gold with the hope that the price of gold will explode in the next couple years to get a portion of your money back.

Keep in mind this is a first generational device. If you are going to spend a lot of money on the Apple Watch, my suggestion is to wait a generation or two. One simply need to look at the product cycle of the iPad or iPod, where there’s almost no compatible apps for the first generation (and now I’m seeing more and more apps that are non-compatible with the iPad2). By simply waiting a little bit you’re making sure the watch is not just another fad and any imperfection will be corrected in their next release. I will be looking in pawn shops in a couple years to see how much they are going for.

The gold Apple Watch won’t hurt Apple but it won’t help it. It just won’t work. Apple has enough money to survive an economic tsunami. Apple should just stick to what they do best: products for the masses.

Connan’s pocketwatch


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