Gruber is tripling down on his price predictions

[Rogifan]

Though conversely, Apple has never really positioned themselves as a super-luxury brand either. All their products (bar perhaps a fully upgraded Mac Pro) are within reach for the vast majority of the middle class - Apple consumers are used to paying more for specs, but not for the look.

This, in my opinion, is the hurdle Apple need to overcome. Never have they marketed essentially the same product at such a vast range of price points.

Hence why I think they're going to need to spend a fair amount of time tomorrow explaining why the SS collection deserves to be as expensive as it is. And it will need to be immediately apparent that the SS collection makes other smartwatches look like toys (regardless of ones opinion on round vs square). I want to see someone holding an Apple link bracelet and saying it puts everything else to shame (even some high end traditional watch bands). If Apple is going to charge luxury prices then I damn well better be able to notice.

 

[rasputin1969]

And they are positioning the SS and AWE vs. the traditional mid-level and super luxury watches.

The tradional luxury market is slit into three tiers

1. High. Patek Philippe, audemars piguet, jaeger lecoultre. $14,000 for steel models.
2. Middle. Rolex, omega,breitling. Rolex start at $5,000 in steel
3. Low. Tag Heuer, Longines. $900 at the low end (Quartz)

If the SS with bracelet come in at $1,500-$1,999 Apple are firmly in the lower level luxury tier.

To be honest it puzzles me that Apple would compete in the lower end of the luxury market.

 

[cambookpro]

Marketing-wise no, you are correct. It's doesn't sell itself as "luxury. But its stores are mostly located in luxury/high end malls or in the high end wing of a mall. And price-wise its products have always carried a steep premium over competing ones and without apology.

I see Apple Stores everywhere now, I don't think they are always located in high end bits of shopping centres. My local one is on the same level as a Jessops, La Senza, Starbucks, H&M, Ed's Diner etc. It doesn't really say to me 'luxury'.

It is true that Apple products have carried a premium, but the premium isn't ever absolutely massive. An iPhone 6 retails for only slightly more than an S6, compare a MacBook Air and a similarly specced aluminium ultrabook and the difference isn't great either.

Apple have always trod a fine line between giving its products a premium feel compared to its competitors, yet still being affordable.

 

[Repelle]

I'm going to go out on a limb and say that Gruber's pricing is way off the mark.

1. I don't think the stainless steel model is going to command a significant premium over the aluminium model. It may be an "aspirational" product, but if Apple has any sense then they wont price this out of reach for the average Joe.

These are going to be the bread and butter models in terms of sales, they HAVE to be priced fairly close together, no more than $200-$250 I'd say. People aren't going to look at the stainless model and think a sapphire display and polished body are going to be worth an extra $400-$500. I just don't see it happening.

At the end of the day, Apple is a technology company, despite their marketing in Vogue and the like. Leave the Edition variant for the luxury market and the people who don't care about it being obsolete in two years. Again, Apple aren't going to price their mainstream models at a price point where people are going to say no, especially as this is going to be sold as an accessory.

2. The other thing that makes no sense are the over-inflated guesses on the straps. Some predictions are flying about with a price range in the hundreds of dollars between them. Sure, the steel bracelet is going to cost more to manufacture and design than a leather strap, but that should not translate to hundreds of dollars difference when they go on sale. No one in their right mind is going to look at the metal straps and think "Yeh I'm going to go with that, I don't care if it costs me an extra $250 on top of the leather one".

Don't get me started on colour....I doubt that there will be little if any difference for the black variants.

I think the pricing is going to be far more compressed than some people have predicted, especially between the Sport and Apple Watch. Who knows, maybe even the Edition too.

 

[cleirac]

The tradional luxury market is slit into three tiers

1. High. Patek Philippe, audemars piguet, jaeger lecoultre. $14,000 for steel models.
2. Middle. Rolex, omega,breitling. Rolex start at $5,000 in steel
3. Low. Tag Heuer, Longines. $900 at the low end (Quartz)

If the SS with bracelet come in at $1,500-$1,999 Apple are firmly in the lower level luxury tier.

To be honest it puzzles me that Apple would compete in the lower end of the luxury market.

Yeah, right if we have to count the "uber luxury", tiny population, Pateks of the world.

 

[jsmith189]

No matter the prices it's gonna be a media ****-storm, so this'll be interesting. I will say, I think he's prices the SS models a little too high, but we'll see.

 

[ButteryScrollin]

I thought people were crazy when they said the Edition might be $1k-$1.5k, but if people think the steel with a nice band isn't going to be up and around $1k, they crazy.

People expecting the steel with a leather band to be ~$600 be to recalibrate their expectations.

 

[rasputin1969]

Yeah, right if we have to count the "uber luxury", tiny population, Pateks of the world.

I believe the Patek Phillippe Nautilus is about $14,000 - on rubber strap

 

[papa8706]

I simply do not get this bleating about the SS price.

If you want a reasonably priced Apple watch - get the sports edition.

If you want the SS - be prepared to pay $$$. What? - it's too expensive? Then get the sports model. But you really, really want the SS with bracelet! Good -that means Apple have done a great job. Start saving, get a better job, or, you know, stop whining and get the sports edition.

This is the kind of mindset that enables companies like apple to overprice their products and take advantage of the consumers who enjoy them. Leading to the "fanboy" term people love to throw around.

Get a new job? Stop whining? Or get the one you really didn't want? You sit here defending a company who will continue to sell their products for as much as fools are willing to let them get away with.

This thing can't even work on a phone earlier than the 5S and you're telling me it justifiable to show people 3 different watches then tell them by the way the 2 that could even pass in a work environment are 5-20k and prob won't even work on the new phone you get in 3 years. Nonsense

 

[ButteryScrollin]

1. I don't think the stainless steel model is going to command a significant premium over the aluminium. model. It may be an "aspirational" product, but if Apple has any sense, then they wont price this out of reach for the average Joe.

Then, as Gruber points out, why do they both exist?

Apple should rename to product:

Apple Watch Average Joe (was Sport) - for the majority of people
Apple Watch Really Well Off - for those who like nice status symbols like flashy cars and have a lot of cash
Apple Watch More Money than Sense (Was Edition) - for celebrities and millionaires.

 

[profmjh]

I'm going to go out on a limb and say that Gruber's pricing is way off the mark.

1. I don't think the stainless steel model is going to command a significant premium over the aluminium. model. It may be an "aspirational" product, but if Apple has any sense, then they wont price this out of reach for the average Joe.

These are going to be the bread and butter models in terms of sales, they HAVE to be priced fairly close together, no more than $200-$250 I'd say. People aren't going to look at the stainless model and think a sapphire display and polished body are going to be worth an extra $400-$500. I just don't see it happening.

At the end of the day, Apple is a technology company, despite their marketing in Vogue and the like. Leave the Edition variant for the luxury market and the people who don't care about it being obsolete in two years. Again, Apple aren't going to price their mainstream models at a price point where people are going to say no, especially as this is going to be sold as an accessory.

2. The other think that makes no sense are the over-inflated guesses on the straps. Some predictions are flying about with a price range in the hundreds of dollars between them. Sure, the steel bracelet is going to cost more to manufacture and design than a leather strap, but that should not translate to hundreds of dollars difference when they go on sale. No one in their right mind is going to look at the metal straps and think "Yeh I'm going to go with that, I don't care if it costs me an extra $250 on top of the leather one".

Don't get me started on colour....I doubt that there will be little if any difference for the black variants.

I think the pricing is going to be far more compressed than some people have predicted, especially between the Sport and Apple Watch. Who knows, maybe even the Edition too.

I broadly agree. It simply doesn't make sense for the base SS model with rubber strap to cost double the price of the Sport, or even close to double. What are you getting for the extra? A shiny case. The other stuff (sapphire, ceramic) you can't even see. Oh, and don't forget the extra weight. I'm almost surprised the Sport isn't more expensive, given that it's lighter.

Apple wants to sell (I assume) millions of these watches. They're not competing with Tag, etc, surely? (Do they sell millions a year? I doubt it.)

I do think Apple will spite me and make the black Sports an extra $50. It's a lot nicer than the other ones.

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People expecting the steel with a leather band to be ~$600 be to recalibrate their expectations.

As I've said, I really hope you're right. Then the choice is easy. I'll spend $349 on a Sport. And Apple have lost the $600 in sales they would have got. (Maybe they don't care. Maybe the margin on the Sport is just as good.)

 

[Chupa Chupa]

Except if they are at Best Buy which is everywhere. And I think there are certain reasons, it makes no sense to really set up where people are looking for just something, a $200 laptop will do. And not all malls are really high end but I know many malls have died/started to die and a regular mall looks high end comparatively (like Montgomery Mall in Bethesda, I wouldn't consider a high end mall).

OK.

1) I didn't say ALL malls were high end. Go back are read what I wrote as I was very explicit to say luxury/high end malls OR the high end wing of the mall. The OR means I am excluding any other mall or mall location.

Your example of Montgomery Mall -- I agree it's not a Tyson's but it's the highest-end (now only) mall in Montgomery Co., which is in the top 5 highest per-capita income counties in the country. When Apple chose to build in Montgomery county it could have gone to the lower end White Flint. For those reasons I think you have to consider MM a high end shopping center. Not luxury, but high end.

If you look to other regions where Apple only has a one or two store presence they are always in the highest-end site available.

2) Yes, Best Buy sells products at Best Buy. I don't see your point. Apple products are not discounted at Best Buy and they are also set apart from the $200 PCs and Android tablets.

 

[KPOM]

See his piece here: http://daringfireball.net/2015/03/apple_watch_prelude

Gist of the piece is stainless steel will be very expensive; different prices for the different sizes; no upgrades of the internals; no trade-in program and no 3rd party band program. He says the stainless steel watch has to cost a lot more than the aluminum one otherwise there is no reason for both to exist, and the different materials and manufacturing processes necessitate much higher pricing.

I still struggle with upsell possibilities if the stainless steel starts at $300-$400 more than the aluminum version. Are people going to consider polished stainless steel, sapphire and ceramic back enough of a reason to cough up an an additional $400? And if they want one of the nicer bands, tack on another $1000? Gruber's prices effectively put the stainless steel out of reach for a lot of people. Maybe Apple's expectations aren't to sell a lot of the steel watches but they sure went through an awful lot of work creating all these bands for that collection if their intention isn't to sell that many.

I don't think his predictions are outside the realm of possibility, but do think there is a lot of "space" between his tiers that might be unrealistic.

To me, he is absolutely right that Apple couldn't care less about the LG Watch Urbane or Huawei Watch. They see themselves competing with the watch makers.

I think we can get a sense of pricing by looking at Angela Ahrendts' previous employer. Perhaps add $350 to prices to get a sense of what the Modern Buckle and Milanese Loop/Link versions will cost:

http://us.burberry.com/the-britain-bby1500-38mm-p38393591 ($995)

http://us.burberry.com/the-britain-bby1703-34mm-p38650251 ($1295)

This suggests a $300 premium for a stainless steel band over a leather band. Of course, Burberry doesn't sell watches with "flouroelastomer" bands, so we don't get a sense of the base stainless steel pricing, but I think $700 is about right."

I think he's also right that there won't be a trade-in or upgrade program. At the same time, we may not see the rapid evolution of the technology inside, either. We may see the next version focus more on power consumption, and adding some more health sensors. Eventually we'll see cellular capabilities added, but I don't think we'll fully replace the modern phone with a watch anytime soon. So this is more like a MacBook purchase than an iPod. Apple expects people to buy one of these and keep it for a few years.

Could Apple have messaged this a bit better by calling the stainless steel version a fancy name such as the "Apple Watch Collection" and calling the Sport version the "Apple Watch." But perhaps this was deliberate.

What's clear is that Gruber doesn't have inside information. This isn't Jim Dalrymple with a "yep" or "nope" response. His guesses have been all over the place, and steadily rising. If Apple were looking to use him to message the pricing, he'd have been more forceful with his $9,999 prediction back in September (he actually did peg that as his "bar bet" while promoting the $5,000 prediction), and would have said more about the stainless steel pricing back then, as well.

As for the Edition, yes, the more I think about it, the more I think it will be at least $10,000. Another Burberry example:

http://us.burberry.com/the-britain-limited-edition-18k-gold-bby2001-47mm-automatic-p38859121

http://us.burberry.com/the-britain-limited-edition-18k-trench-gold-bby2000-34mm-automatic-p38859111

 

[leenak]

Then, as Gruber points out, why do they both exist?

Apple should rename to product:

Apple Watch Average Joe (was Sport) - for the majority of people
Apple Watch Really Well Off - for those who like nice status symbols like flashy cars and have a lot of cash
Apple Watch More Money than Sense (Was Edition) - for celebrities and millionaires.

They both exist because there are people who want a light watch that will do well for maximum wear for health monitoring/sports/etc.

The SS would be fore people who want something closer to a traditional watch.

The Edition, I have no idea.

 

[cleirac]

The tradional luxury market is slit into three tiers

1. High. Patek Philippe, audemars piguet, jaeger lecoultre. $14,000 for steel models.
2. Middle. Rolex, omega,breitling. Rolex start at $5,000 in steel
3. Low. Tag Heuer, Longines. $900 at the low end (Quartz)

If the SS with bracelet come in at $1,500-$1,999 Apple are firmly in the lower level luxury tier.

To be honest it puzzles me that Apple would compete in the lower end of the luxury market.

That is why I thought it will be smarter move for Apple to price AWE starting with (much) lower than $5k or maybe max $4k (though a lot will depend on this - wait & see) ... SS to not cost more than $800-$900, even when paired with the most expensive non-gold band ... and the Sport just Apple premium over the most expensive smartwatch in the market now.

 

[Rogifan]

I'm going to go out on a limb and say that Gruber's pricing is way off the mark.

1. I don't think the stainless steel model is going to command a significant premium over the aluminium. model. It may be an "aspirational" product, but if Apple has any sense, then they wont price this out of reach for the average Joe.

These are going to be the bread and butter models in terms of sales, they HAVE to be priced fairly close together, no more than $200-$250 I'd say. People aren't going to look at the stainless model and think a sapphire display and polished body are going to be worth an extra $400-$500. I just don't see it happening.

At the end of the day, Apple is a technology company, despite their marketing in Vogue and the like. Leave the Edition variant for the luxury market and the people who don't care about it being obsolete in two years. Again, Apple aren't going to price their mainstream models at a price point where people are going to say no, especially as this is going to be sold as an accessory.

2. The other think that makes no sense are the over-inflated guesses on the straps. Some predictions are flying about with a price range in the hundreds of dollars between them. Sure, the steel bracelet is going to cost more to manufacture and design than a leather strap, but that should not translate to hundreds of dollars difference when they go on sale. No one in their right mind is going to look at the metal straps and think "Yeh I'm going to go with that, I don't care if it costs me an extra $250 on top of the leather one".

Don't get me started on colour....I doubt that there will be little if any difference for the black variants.

I think the pricing is going to be far more compressed than some people have predicted, especially between the Sport and Apple Watch. Who knows, maybe even the Edition too.

I agree especially re: #1. Why would Apple offer up 9 models in the SS collection if they were planning to price it out of reach for most people? But as much as my heart wants to believe your #1, my head is leaning more towards Gruber. I just hope Apple PR is ready for it.

----------

This is the kind of mindset that enables companies like apple to overprice their products and take advantage of the consumers who enjoy them. Leading to the "fanboy" term people love to throw around.

Get a new job? Stop whining? Or get the one you really didn't want? You sit here defending a company who will continue to sell their products for as much as fools are willing to let them get away with.

This thing can't even work on a phone earlier than the 5S and you're telling me it justifiable to show people 3 different watches then tell them by the way the 2 that could even pass in a work environment are 5-20k and prob won't even work on the new phone you get in 3 years. Nonsense

No, Watch works with the 5 and 5C.

 

[KPOM]

The tradional luxury market is slit into three tiers

1. High. Patek Philippe, audemars piguet, jaeger lecoultre. $14,000 for steel models.
2. Middle. Rolex, omega,breitling. Rolex start at $5,000 in steel
3. Low. Tag Heuer, Longines. $900 at the low end (Quartz)

If the SS with bracelet come in at $1,500-$1,999 Apple are firmly in the lower level luxury tier.

To be honest it puzzles me that Apple would compete in the lower end of the luxury market.

Up until now, they really haven't competed in the luxury market at all. Remember, they still have one foot in the higher end of the tech market with the Sport, which at $349 is still among the more expensive "smart watches." Tim Cook's been wearing the Sport everywhere, right? Perhaps that's a subtle hint that it's "OK" to "settle" for a Sport if the stainless steel is too expensive for you.

 

[rasputin1969]

This is the kind of mindset that enables companies like apple to overprice their products and take advantage of the consumers who enjoy them. Leading to the "fanboy" term people love to throw around.

Get a new job? Stop whining? Or get the one you really didn't want? You sit here defending a company who will continue to sell their products for as much as fools are willing to let them get away with.

This thing can't even work on a phone earlier than the 5S and you're telling me it justifiable to show people 3 different watches then tell them by the way the 2 that could even pass in a work environment are 5-20k and prob won't even work on the new phone you get in 3 years. Nonsense

For the record I think Apple would be insane to follow this strategy but it seems to me, judging by the ads in vogue, the hiring of burberrys ceo and LVMH execs, and the introduction of the gold edition, that this is indeed Apple's strategy.

It is worth pointing out however that the watch can be bought for the reasonable cost of $349 and there is no law that dictates Apple have sell to you only at the price you are prepared to pay.

 

[Rogifan]

I don't think his predictions are outside the realm of possibility, but do think there is a lot of "space" between his tiers that might be unrealistic.

To me, he is absolutely right that Apple couldn't care less about the LG Watch Urbane or Huawei Watch. They see themselves competing with the watch makers.

But still you've got to price it at a point where you are able to upsell. Do luxury watchmakers sell $350 watches? If the base SS watch is too expensive Apple ends up losing money as people either just buy the Sport or if that's too 'sporty' for them they buy nothing at all.

 

[profmjh]

Tim Cook's been wearing the Sport everywhere, right? Perhaps that's a subtle hint that it's "OK" to "settle" for a Sport if the stainless steel is too expensive for you.

Or maybe he really wanted the space black with link strap but couldn't afford it

----------

there is no law that dictates Apple have sell to you only at the price you are prepared to pay.

Well, there are the laws of economics. If you want to sell millions of watches and become the first trillion dollar company, you can't price everyone out of your market.

 

[Sodner]

I'm going on record that he is WRONG, WRONG, WRONG!

There now I too am a Apple insider with a prediction.

 

[Rogifan]

Up until now, they really haven't competed in the luxury market at all. Remember, they still have one foot in the higher end of the tech market with the Sport, which at $349 is still among the more expensive "smart watches." Tim Cook's been wearing the Sport everywhere, right? Perhaps that's a subtle hint that it's "OK" to "settle" for a Sport if the stainless steel is too expensive for you.

No, Tim Cook and Eddy Cue have been wearing the SS with Sport band. The one time we saw Jony Ive with a watch on he was wearing the rose gold with white Sport band.

 

[leenak]

OK.

1) I didn't say ALL malls were high end. Go back are read what I wrote as I was very explicit to say luxury/high end malls OR the high end wing of the mall. The OR means I am excluding any other mall or mall location.

Your example of Montgomery Mall -- I agree it's not a Tyson's but it's the highest-end (now only) mall in Montgomery Co., which is in the top 5 highest per-capita income counties in the country. When Apple chose to build in Montgomery county it could have gone to the lower end White Flint. For those reasons I think you have to consider MM a high end shopping center. Not luxury, but high end.

If you look to other regions where Apple only has a one or two store presence they are always in the highest-end site available.

2) Yes, Best Buy sells products at Best Buy. I don't see your point. Apple products are not discounted at Best Buy and they are also set apart from the $200 PCs and Android tablets.

I'm not much of a mall shopper anymore so I actually don't know all the malls in the area. I just meant that all malls where Apple sets up aren't really high end. I know Montgomery Mall well but Apple isn't in a high end section and I just meant it isn't a high end mall. But Best Buy sells Apple products and Best Buys are everywhere. I just meant if Apple was only selling to high end areas, they wouldn't be at Best Buy.

 

[Rogifan]

Well, there are the laws of economics. If you want to sell millions of watches and become the first trillion dollar company, you can't price everyone out of your market.

Exactly. I'd be curious to know who at Apple is most responsible for deciding prices (besides Cook). Is it Schiller?

 

[KPOM]

Well then that's a failure of Apple's marketing back in September. Nothing in Tim Cook's presentation or Jony Ive's video implied the Sport collection was for everyone and the SS collection was asperational. If that's the case why are there only 5 models in the Sport collection vs 18 in the SS collection. Seems like a lot of models for an asperational product. And why does the Sport collection only contain rubber bands?

If you think about it, the Sport is the version that Tim Cook has been wearing. If the stainless steel watches were going to be $150-200 more than the Sport, then they would be using similar materials to the watches you can find at Kohl's or Macy's rather than Burberry.