I Feel The Apple Watch Should Really Be $200 For Stainless Steel...

[Elwots]

I went with the Series 1. I didn't see a big enough difference between the 1 and the 2 to justify an extra $100. But IMO, the extra ~$100 is justified between the original and the S1. You get twice the processing power, which makes a huge difference.

I got my 42mm S1 on sale for $269, which I think was a great buy.

 

[oneMadRssn]

Here's the question:

If you're selling something to someone, and you know you can sell it for $200 and still make profit, but people are lining up to pay $600 (and literally waiting weeks to do so), what is your product "worth"?

Should you sell it for $200 just because you "can" or because someone says you "should"?

That's the beauty of free market economies. If the watch really is overpriced, it will 1) not sell OR 2) have it's price lowered so it does. If neither apply, the product fails.

Apple could have stopped after S0. Instead they tweaked a bit, eliminated the gold "Editions", and S1/2 are selling well enough to STILL cause a line to buy them. Even at $600.

Just because it isn't worth it to YOU, doesn't mean it "isn't worth it". You are free to enjoy your FitBit or used S0 though, nothing wrong with that either!

This assumes an elastic supply. If Apple made 200k units of the Watch (an inelastic supply), sell it for $200, and 500k people are willing to pay anything up to $600 for it, but the population of people with $200 to spend on a nifty gadget is 100mil: then it will seem to the outside observer that the watch somewhere between underpriced or priced correctly because they will sell out of the 200k units quick and there will be lines and inflated prices on the secondary market.

On the flip side, if Apple makes the number of watches to match whatever the demand is with no delay (a perfectly elastic supply), sell it for $200, and 500k people are willing to pay the asking price, but the population of people with $200 to spend on a nifty gadget is 100mil: then it might seem to an outside observer that the watch is overpriced if only 500k people (0.5% of the eligible population) are converted into sales.

The reality, it seems, is somewhere in between. The supply is initially inelastic, but becomes more elastic over time. Also, the number of folks willing to pay the asking price is largely a factor of marketing and such.

I agree though, it all depends on what it is worth to YOU. However, if the number of folks to whom it is worth that much remains less than critical mass adoption, it's not good news for the product.

 

[ApplePhy]

Rather people say, "I have $300-$400 to spend on a new gadget, so I'm going to shop for a gadget. Do I feel like a gaming console, a TV, a smartwatch, an audio system, a kitchenaid, some other fitness thing, etc... I can see a lot of people deciding they would rather have an PS4Pro than an Apple Watch, or a couple of Sonos speakers.

I don't think anyone is thinking "should I buy a TV, kitchenaid or an  Watch?". This is ludicrous.

People buy things based on their needs, which of course, is directly correlated with the amount of expendable income they have. it's a delicate balance. If you need something, you're more apt to purchase it with less emphasis on if you can absolutely afford it or not (i.e., smartphones). If you don't need something, but want it, you'll weigh the purchase based on your finances.

i don't ever walk into BestBuy with a dollar amount in mind, and then walk over to kitchen supplies, look at a Samsung TV, and then peruse the  Watches to cross shop.

If you gave me a $400 gift card which expired the next day, then maybe...

 

[oneMadRssn]

I don't think anyone is thinking "should I buy a TV, kitchenaid or an  Watch?". This is ludicrous.

People buy things based on their needs, which of course, is directly correlated with the amount of expendable income they have. it's a delicate balance. If you need something, you're more apt to purchase it with less emphasis on if you can absolutely afford it or not (i.e., smartphones). If you don't need something, but want it, you'll weigh the purchase based on your finances.

i don't ever walk into BestBuy with a dollar amount in mind, and then walk over to kitchen supplies, look at a Samsung TV, and then peruse the  Watches to cross shop.

Have you never received a gift card as a birthday or holiday present? That is precisely the situation of having $x to spend with no clear "need" to speak of.

Also, when budgeting discretionary or frivolous purchases, the situation is typically similar. I budgeted for myself $x to spend on some fun gadget, and now I'm looking at a TV, a game console, an apple watch, or something for my hobby (or whatever else is on my wish-list). It's not that unusual...

 

[ApplePhy]

Have you never received a gift card as a birthday or holiday present? That is precisely the situation of having $x to spend with no clear "need" to speak of.

Also, when budgeting discretionary or frivolous purchases, the situation is typically similar. I budgeted for myself $x to spend on some fun gadget, and now I'm looking at a TV, a game console, an apple watch, or something for my hobby (or whatever else is on my wish-list). It's not that unusual...

You're missing the point here.

A gift card or a holiday present is a GIFT that is given to me. I would spend as such. Perhaps buy something I wouldn't have considered before. Why? Because it's not my money to spend.

But a purchase you make with your own hard earned money is just that: its money that you have personally earned.

Quite different scenarios.

 

[oneMadRssn]

You're missing the point here.

A gift card or a holiday present is a GIFT that is given to me. I would spend as such. Perhaps buy something I wouldn't have considered before. Why? Because it's not my money to spend.

But a purchase you make with your own hard earned money is just that: its money that you have personally earned.

Quite different scenarios.

I was merely responding to your statement that it was a ludicrous scenario. It's not ludicrous at all, but rather common.

 

[koigirl]

I bought an aluminum Series 2 38mm a week ago in a weak moment as I've been wanting to try out the Apple Watch since its 2015 launch. I love gadgets (especially Apple ones) and was waiting for more compelling upgrades (such as stand-alone functionality and better battery life) but finally caved and bought one. After wearing it and playing with it for a few days, I do think it is overpriced for the functionality it offers and I'm glad I didn't spring for the stainless steel model. That being said, I will probably keep it and use it. The notifications are useful. The question is whether they are worth the $400 price tag (including taxes and shipping). I don't plan on upgrading, though, until the applications, functionality, and battery life are better and it can function independently of my phone. Then I would feel comfortable spending more for the stainless steel model. I can easily afford it; I'm just not sure the value is there for those on a limited budget.

 

[LordQ]

For something I don't plan on upgrading for at least 5 - 6 years, like my iPhone and iPad, I think it is worth the price.

 

[Riley0818]

This assumes an elastic supply. If Apple made 200k units of the Watch (an inelastic supply), sell it for $200, and 500k people are willing to pay anything up to $600 for it, but the population of people with $200 to spend on a nifty gadget is 100mil: then it will seem to the outside observer that the watch somewhere between underpriced or priced correctly because they will sell out of the 200k units quick and there will be lines and inflated prices on the secondary market.

On the flip side, if Apple makes the number of watches to match whatever the demand is with no delay (a perfectly elastic supply), sell it for $200, and 500k people are willing to pay the asking price, but the population of people with $200 to spend on a nifty gadget is 100mil: then it might seem to an outside observer that the watch is overpriced if only 500k people (0.5% of the eligible population) are converted into sales.

The reality, it seems, is somewhere in between. The supply is initially inelastic, but becomes more elastic over time. Also, the number of folks willing to pay the asking price is largely a factor of marketing and such.

I agree though, it all depends on what it is worth to YOU. However, if the number of folks to whom it is worth that much remains less than critical mass adoption, it's not good news for the product.

Sorta. If it wasn't "good news for the product" it would have one of four effects: 1) it would be discontinued 2) it would have it's price slashed 3) it would be substantially upgraded or 4) it would be a "loss leader" for a company in order to be a gateway to other products.

I think everyone would agree that almost no one thinks of the Apple watch as the first Apple product someone is going to buy, which rules out #4, so outside of #1 happening, it's pretty clear Apple is happy with the elasticity of the demand it is generating based on it's supply, because they aren't rapidly changing the price and made almost no dramatic changes to the product itself.

Just because Apple isn't trying to make a watch for "everyone" doesn't mean the product is "in trouble" because they aren't ramping production. If anything, an argument could be made that they substantially UNDERestimated demand in both the S0 and now S1/2 launches based on wait times. Again, the #'s they are targeting are obviously what they are happy with, otherwise #1, #2 or #3 would have happened in an appreciable way.

"The number of folks willing to pay the asking price" is essentially the DEFINITION of value. If it's "most" of the target expected audience, the value is accurate (or perhaps even under), if it's "few" then adjustments need to be made. Just because Apple isn't targeting 100's of millions of sales for their watch doesn't mean it isn't a good value for their targeted audience.

If I sell mustache combs for $30 at a mustache convention, and they sell as fast as I put them on the table, it doesn't mean I am overvaluing them if someone says "well of course, but if you sold those at a women in leadership expo you wouldn't do so hot...".

The targeted audience is the one Apple really cares about, and that audience is lining up to pay full price and wait for the privilege.

 

[Theophil1971]

The price of the steel watch is based on the price of the basic aluminum models.

If you're Apple and you're going to price the steel at $200, you'd better be ready to sell the aluminum watch -- including strap and charging cable -- for fifty bucks. If, instead, you priced the aluminum at the same $200, with plain Ion-X glass and plastic back, there'd be no incentive for a buyer to choose aluminum.

This is precisely right. And considering the fact that the Sport (aluminum) models cost around $85 just to produce (to say nothing of R&D and profit margin), the theory that the SS model should cost $200 is patently ridiculous.
It's just a sentiment from people who feel entitled to have lots of advanced, expensive stuff for free or cheap. They always forget the fact that companies charging premiums to make profit is precisely the engine that drives the innovation and technological progress which makes the products they covet (but want for cheap) possible. Without the high prices, the products wouldn't exist in the first place...

 

[bunnicula]

This is precisely right. And considering the fact that the Sport (aluminum) models cost around $85 just to produce (to say nothing of R&D and profit margin), the theory that the SS model should cost $200 is patently ridiculous.
It's just a sentiment from people who feel entitled to have lots of advanced, expensive stuff for free or cheap. They always forget the fact that companies charging premiums to make profit is precisely the engine that drives the innovation and technological progress which makes the products they covet (but want for cheap) possible. Without the high prices, the products wouldn't exist in the first place...

I try to keep in mind that people thought for years that iPhones cost 200 dollars because that's how much you could buy one for on a 2-year contract through a carrier. If you pay cash for iPhones, you know that they're not 200 dollars. And, if watches have subsidies one day (they might if they ever have LTE and are tied to a carrier), then people will start to buy them more, even though they'll still pay the same price due to carrier charges for service. It'll just be hidden, so they'll have the illusion that Watches are more affordable.