Why Apple should sell a $5000+ watch.

Discussion in 'Apple Watch' started by kmj2318, Sep 20, 2014.

  1. kmj2318 macrumors 68000

    kmj2318

    Joined:
    Aug 22, 2007
    Location:
    Naples, FL
    #1
    If the person has $100 million and you offer them a $500 aluminum version and a $5000 gold version, what difference is the price to them? It's about the difference between $.50 and $5 to normal people, not even something to think about. The question for Apple is, why sell something to someone for $500 when they'll just as easily pay $5000 for a fancy version?

    It's not a very large market, but the rich are getting richer and the middle class is shrinking. Apple's target market is the middle class– what do you do when it's shrinking? You can go upmarket with differentiation, or downmarket with price. Apple knows it's strength.

    This reminds me of a book called "Average is Over." It says the rich will continue to get richer because successful businesses have a larger reach than ever before (mainly from the internet), and this crowds at all the second players, creating a winner-take-all payout. Consider the landscape for internet businesses: A small portion of sites make up almost all of the traffic, and get almost all of the money, leaving very little for anyone else. It's the scalability that creates ultra wealth, and things are becoming ever more scalable, crowding out the middle class. The world is quickly moving towards a place where there are two kinds of people: successful entrepreneurs, and highly educated temp workers who get paid little because so many people are educated, with no middle ground for a middle class.

    Consider musicians. There are small number of superstars who make the majority of the money. This is because their product can scale. In Mozart's time, his music couldn't scale (no records, radio, etc.). Even though he'd get the best concert halls, he couldn't be everywhere at once, so the lesser known musicians could still make a good living. Now we have superstars and starving artists, and it's doesn't have anything to do with people not wanting to pay, or any moralist view, it's just that when a person wants to listen to Beyonce, they can; there's no need to compromise for a second rate Beyonce, like there would be to see a second rate Mozart.

    Apple being a technology company knows the role technology has on the world. On one hand, it democratizes information, but on the other, the best of the best can be everywhere. So if you're not the very best, you're not very valuable.

    There are plenty of statistics that show how much of the world's wealth is comprised of a very small group of people. Why do you guys think it's silly for Apple to consider that market? A market of people who'd buy things without even batting eye, in multiple quantities, a few for their friends, one of each color, etc. This is why we see so many more companies making supercars than ever before. Imagine the money Apple is leaving on the table every time it sells an iPhone to a rich person who would have easily paid several times that amount. I wouldn't be surprised to see Apple offer it's other products in more expensive materials eventually.

    A company that sells to the middle class will have to make the decision to compete on price to sell to everyone, or differentiate to sell to the rich. We all know the middle class is shrinking. This shift could easily be the downfall for the worlds largest companies if they're not prepared for it. Apple looks like it wants to be. I think Apple could be a company that sells to both segments by offering great functionality that everyone can use, but also something that the rich are willing to pay more for. Think Jon Gruber's use of Andy Warhol's Coke example: Technology allows rich people and poor people to have the same product. It's no about Apple abandoning the democratization technology gives us, it's just selling Coke in different cans.
     
  2. mojolicious, Sep 20, 2014
    Last edited: Sep 20, 2014

    mojolicious macrumors 68000

    mojolicious

    Joined:
    Mar 18, 2014
    Location:
    Sarf London
    #2
    Many sources believe that the Watch Edition will be $5000 a pop.

    For the truly wealthy I'm sure there'll be companies who will bling up Watches and sell them at prices from $10k to $1m+, depending on the degree of vulgarity required.

    I'd imagine Apple would be much happier making $100 on each of ten million Watch Sport sales, rather than $5k on each of ten thousand Watch Crœsus sales, or $100k on each of a hundred Crœsus Plus sales?
     
  3. Piggie macrumors 604

    Piggie

    Joined:
    Feb 23, 2010
    #3
    I question the silly price Apple Watch, as if Apple did want that, then they might as well make a 100 of them, and auction for charity and let them be seen as collectible items, or work by the very wealthy.

    It's zero cost to Apple, just put it on the marketing budget.

    Simple, but I don't think they want that. Apple WANT money, they WANT mass sales.
    They will over price the cost difference to them, without question, like like they do Memory and SSD's in their computers, but I think they want mass sales of the gold ones. Tens of thousands even.

    Looking forward to seeing their pricing. I don't think they want to overprice it at all. They just want to keep it high enough so it's seen as premium, but cheap enough that many buy it.
     
  4. Cashmonee macrumors 6502a

    Cashmonee

    Joined:
    May 27, 2006
    #4
    Problem is, gold is expensive. The cost of making solid 18k gold casing will have to be recouped. I think the $5000 predictions have mostly to do with cost, not so much margin.
     
  5. Piggie macrumors 604

    Piggie

    Joined:
    Feb 23, 2010
    #5
    Gold is expensive yes :)

    However it's not AS expensive as fashion makes it out to be.
    Scrap gold, eg a bit of metal, is a fraction of the price of the jewelry made from it, even when the jewelry is basic.

    I have often been amused at the thought of the posh lady who looks in a store window at the gold chain laid out in a stunning setting and pays 4x what it's worth.

    In reality, it's some cardboard box's, some cheap blue fake velvet draped over the box's, with some glass crystals scattered around and some small 12v spotlights to make it all shine and sparkle with the gold chain hanging over it all in a lovely display.

    She wants one just like it, but 2" longer.

    No problem madam, come back in 30 mins and it shall be yours.

    The guy goes to the back room to an old fat scruffy guy, smoking a roll up, not shaved for a month, 50 metre reels of gold chain hang up on the grubby wall, he reels off a length, snips a link, using his tools and his simple skills, joins the links to the length she wants, shouts to the guy it's ready.

    He takes is from the guy, shuts the door, and pulls out the wooden presentation box, again lined with a small square of fake velvet, puts in a business card.

    The lady returns, big smiles, and sells it to her at 4x the cost of the gold chain on a 50m reel.

    It's all fake, presentation.

    If Apple go $5000 which I don't think they will, it will just be for advertising purposes, as it's no better internally of functionally than a $350 model.

    It's not like a $5000 proper watch where you are paying for craftsmanship.
    That is the same on the Apple watch.
    It's just the case is gold.

    I still feel you are WAY overpricing this, gold is not THAT much.
    I've never machined gold, but I'd imagine it was VERY easy to machine.

    The only difference to Apple is the trade price of raw material in bulk.
     
  6. SHNXX macrumors 68000

    Joined:
    Oct 2, 2013
    #6
    I have watches ranging from $50 to a little above $30,000.

    An apple watch that will be useless in 2-3 years that costs $5000 is way too much for me.
    I think it is way too much for some of the people I know who own many watches that cost more than $50k USD.

    If it costs $5000, it will appeal to a small percentage of people who regularly buy watches above $5000.
    I think as a limited release, such a device could still sell out but I don't think it can be a huge commercial success.
     

Share This Page