Why It’s OK Apple’s Gold Watch Is Too Expensive for Most

Source: Apple.com
Source: Apple.com

Although the April launch of the Apple Watch is right around the corner, there remain many unanswered questions about the Cupertino-based company’s first foray into wearable tech. Some pundits have wondered if the device is innovative enough to attract buyers since it doesn’t appear to offer any compelling new functions. Since the Apple Watch must be tethered to an iPhone in order to operate, its primary function appears to be its ability to discreetly relay notifications from another product.

That is not exactly a revolutionary function in comparison to what Apple’s other products offered when they first came on the market. The iPod gave users the ability to carry their music collections in their pockets and the iPhone gave users access to the Internet while on the go. However, CEO Tim Cook appeared to focus on the notification function of the Apple Watch as one of the device’s main selling points during a recent appearance at the annual Goldman Sachs Technology and Internet Conference.

“And so you can imagine, in a meeting, how distracting it is to watch everybody do this all the time,” said Cook at the conference while miming the motion of taking an iPhone out of his pocket, according to iMore. “And here, it’s kinda little subtle. And if you’re interested in keeping up with the sports score to the financial markets to whatever it is, it’s like this, the Watch knows you’re looking at it, and it comes on. If I’m not looking at it, the Watch is off.”

With a total of 34 different versions of the device across three “Collections,” there are also questions about exactly what type of customers Apple is trying to target. With a casing made of anodized aluminum, the Watch Sport is widely assumed to be the entry-level model that Apple revealed would start at $349. Considering that iPhones are already more expensive than most comparable smartphones on the market, it seems conceivable that Apple’s customers might shell out $349 for the convenience of not having to constantly pull their iPhones out to check for notifications. On the other hand, several new reports about the premium gold Apple Watch Edition model suggest that it could be the most expensive product in the company’s history.

Source: Apple.com
Source: Apple.com

According to an analyst cited by Forbes, the gold Watch Edition will cost at least $5,000, but is likely to cost even more. The $5,000 price is based on the device’s estimated bill of materials and the percentage of profit that Apple typically makes on its products. Another report from The Wall Street Journal similarly predicted that the gold Watch Edition would be one of Apple’s most expensive products with a price that is expected to be higher than “the $4,000 Mac Pro computer.”

Either way, would most customers — even loyal Apple users — pay over $5,000 for the convenience of having notifications delivered to a wrist worn device? With over 74.5 million iPhones sold during the holiday quarter, there are clearly plenty of people that are willing to pay a little extra to own one of Apple’s premium smartphones. That being said, there is probably a lot fewer people that are willing, or able, to pay the price of a used car for a device that essentially only enhances the capabilities of an iPhone.

Fortunately, Apple appears to understand that there is a limited market for an exclusive product like a $5,000-plus gold smartwatch. According to sources cited by The Wall Street Journal, the Apple Watch Edition will have a smaller production run than the models from the other Collections. There are also indications that Apple is marketing the Watch Edition model at a very specific niche customer. Apple has been recruiting luxury and fashion retail workers ahead of the Apple Watch launch, as reported by 9to5Mac.

WANG ZHAO/AFP/Getty Images
Photo credit: WANG ZHAO/AFP/Getty Images

Meanwhile, Apple retail chief Angela Ahrendts has implemented multiple changes in the Apple Store that appear to be aimed at a new breed of customer, such as redesigned uniforms and new sales training. Ahrendts, who previously helped revitalize Burberry by expanding the luxury brand’s presence in China, may be taking a similar approach with the Apple Watch Edition. According to a message to Apple retail employees seen by 9to5Mac, Ahrendts is seeking workers that are willing to relocate to China in order to help establish new stores in the region. While this is likely part of an overall effort to raise the company’s profile in that country, it may also be related to the upcoming debut of the gold Watch Edition.

According to a study from China’s Hurun Research Institute, Apple became the No. 1 preferred brand for gifting by China’s richest last year, overtaking brands like Hermès and Gucci. As previously noted by The Wall Street Journal, Apple’s gold-colored iPhone 5S model was especially popular in Asian markets where the color has positive cultural connotations. Both factors may help make China’s wealthy elite the primary target market for the gold Watch Edition models.

Finally, it should be noted that regardless of the number of gold Watch Edition models that Apple is able to sell, the device will still bolster the appeal of the company’s brand. As noted by Cook during his appearance at the Goldman Sachs tech conference, one of the secrets to Apple’s success is the aspirational appeal of its products. “People everywhere in this world want a great product,” noted Cook, according to iMore. “And that doesn’t mean that everyone, every single person in the world can afford one yet. But everyone wants one.”

Follow Nathanael on Twitter @ArnoldEtan_WSCS

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