Apple Treated Its High-End Watch Like a Gold-Headed Stepchild

Considering it’s such a radical change of pace for Apple, and that it’s received the lion’s share of the press attention, Apple didn’t talk all that much about the 18k high-end watch during its March 9 watch unveiling.  

It showed videos on the aluminum and steel in its watches, but not on its new iGold. And no executive addressed—and the company still hasn’t—the central question surrounding the Edition concept: What about trade-ins? How are they going to make sure this keeps its value? 

Perhaps Apple wanted a tonier setting to spotlight its new $17,000 creation than a hype-filled announcement where a lot of presenters didn’t tuck their shirts in. The Above Avalon blog believes the lack of mentions “suggest there will be a very clear difference, or segmentation, between how the Edition is sold compared to the other two tiers.… There will likely be very few instances of $349 Apple Watch Sports being sold next to $17,000 Apple Watch Editions.” 

But it’s also a sensitive subject. The $17,000 price tag drew a series of snarky tweets. The Atlantic called it “gratuitously expensive” and declared “Apple has lost its soul.” Cliff Kuang in Wired writes that Apple is playing a “double game,” which is rare for brands. “G-shock would be insane to attempt to sell a $1,000 watch.” 

Still, Apple seems set on its path: Recent leaks suggest Apple is looking at a platinum watch and is in talks with Nordstrom. And from a business point of view, it makes sense.

“To grow [its] $700 billion [valuation] into $1 trillion, [Apple] can’t make cheap stuff,” says Kuang. “A hundred-dollar gadget would have to sell to virtually every middle-class family in the country to yield meaningful revenues for Apple. So the company is pursuing another strategy: Progressively moving the price points of Apple’s wares ever higher.”

The question is: Now that Apple has embraced luxury, will that market embrace Apple?  “Luxury reflects exclusivity, fine craftsmanship, artistry, and heritage,” says Andrew Block, the former executive vice president of Tourneau who now heads Stephen Silver Fine Jewelry. “I cannot imagine an Apple Watch being passed on to the next generation, nor can I imagine how an Apple Watch, that will be obsolete in a year or so, fitting into the definition of luxury.” 

Yes, compared to a Patek Philippe, buying a 17 grand Apple Watch doesn’t make sense. Of course, as we all know, buying any luxury item doesn’t always makes sense. “People don’t buy $4,000 Hermès handbags to improve their ability to carry things,” wrote The Verge. Some point to Vertu, the former luxury arm of Nokia, which has developed a solid business in blinged-out smartphones—a product that also has a limited lifespan. 

Still, Apple has a challenge: How it balances both the tech (logical) and fashion (aspirational/emotional) messages. Tech journalists “seemed perplexed by how Apple was communicating about the Apple watch,” writes Ablogtowatch, “[neglecting] to really talk about the tech.”

Ironically, some in our business didn’t see that at all. Apple’s presentation “spent more time talking about the aluminum and stainless steel,” says Mark Hanna, chief marketing officer for the Richline Group. “They are appealing to the techno person. Their marketing is not emotional.”

Perhaps the dual message—and attendant mixed messages—stems from a weakness in the smartwatch concept. When it first introduced the watch, Apple senior vice president of design Jonathan Ive said the new product is “as much about personal expression as functionality.” That may be behind all the hype about fashion. The watch doesn’t have exciting functionality. 

Just about everything it does can almost be handled by your smartphone. But you need a iPhone nearby for it to work, so you might as well use that. Given that most of us have a love-hate relationship with our devices, the new watch will inevitably give us plenty that annoys us. It may not add enough value to make up for that.

What will this mean for the traditional watch industry? Following the presentation, Block says, “my sense from speaking with industry execs is that they are breathing a sigh of relief. The Apple Watch may not be as big a threat to traditional watch brands as initially feared.” 

That said, it’s never wise to doubt the most valuable company in the world, which regularly tops “most respected brands” lists. As a Forrester analyst noted on Twitter, some suggest that Apple may sell as many as much as 30 million watches this year. That is about how many watches all of Switzerland exported in 2014. (And, of course, Apple’s market cap tops Switzerland’s GDP.) 

Whatever happens with this, the Apple Watch could spell a turning point in the timepiece business. It has gotten people to think and talk about watches in a way they haven’t in years. And it’s also forced the industry to think about just what it’s offering, and how to make it more practical.

When cell phones became ubiquitous, the watch industry readjusted to focus on form and fashion. Now we may be seeing another pivot—one that could affect all levels of the business.

“Today’s Rolex buyer [may not] buy an Apple Watch Edition for thousands of dollars,” said Forrester analyst James McQuivey, quoted in Fortune. “[But] tomorrow’s Rolex buyer may never materialize, having been thoroughly trained to believe watches should be as useful as they are beautiful.”

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JCK News Director

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