Thoughts on the Apple Watch Edition

On stage yesterday, at the end of a nearly 90-minute presentation of Apple’s new watch, and other products, Tim Cook said:

“There will be limited quantities of the Apple Watch Edition. It is priced from $10,000, and it will be available in select retail stores.”

Mr. Cook paused for a half-second just after saying the price, and the silence in the room was palpable. Watching Cook say these lines, I was struck by what seemed to be a bit of embarrassment, as though he wasn’t fully behind the idea of selling a watch at this price.

In the weeks preceding yesterday’s announcement, a lot of people made predictions of the price. (Mine are here. I was pretty close for the first two models, but way off on the Edition.) In discussions I had with several people, I constantly heard the comment, “But this is a luxury watch. You don’t understand the luxury watch market.”

Perhaps. I’d never buy a watch that costs more than my car. But what about people who do know the luxury watch market? The Verge published some comments by Benjamin Clymer, who runs a luxury watch website. Mr. Clymer explained what makes a luxury watch, and, according to his comments, the Apple Watch Edition is not a “luxury watch,” other than its price. He said:

“With Apple Watch, the price differentiation between the entry-level Sport at $349, the standard Apple Watch at $549, and the Edition at $10,000 is about perceived value — what materials are used in the case, bracelet, and straps, but also how much people believe they should be paying for the product. In addition to perceived value, mechanical watches are also priced by human value: how much of the work is done by hand (in many cases using 200-year-old methods).”

Mr. Clymer discussed the amount of human intervention and design present in watches at various price points, and said:

“Above $5,000 one should expect both an in-house movement and some hand-finishing, with details not only recognized but put at the forefront.”

But he also pointed out that:

“…these watches are not devoid of perceived value — the majority of watches here benefit from multi-million-dollar advertising and branding budgets, conditioning us to believe they are worth the price of entry.”

That’s a very important point to realize. Even if you aren’t the target demographic for these watches, you’ve certainly seen their full-page ads with well-known athletes, actors and models, in magazines. These ads cost a lot of money; and much of what you pay for in, say, a Rolex is its marketing.

Mr. Clymer discussed watches around the Apple Watch Edition price point:

“From $10,000 to $20,000, you are into the realm of watchmaking where everything you see is original and interesting — or at least should be. […] all featuring truly in-house movements with a moderate amount of hand-finishing to internal components. These watches will be assembled by hand, completely in Switzerland and offer the incredibly low tolerances and extreme quality for which this industry is known.”

In my article predicting the price of the Apple Watch Edition, I said:

“The Apple Watch Edition is not a luxury watch; it’s just a gold-cased version of the cheaper watch. There’s nothing exclusive about it, nothing special. It’s not like more expensive watches where you pay for complex machinery. Yes, there is gold; that will make it more expensive than the other models. But not that much. Estimates of the cost of the gold suggest that the metal would cost less than $1,000.”

I still feel that way. It’s the same watch with a different case.

I wonder if Tim Cook’s embarrassment is a tell; a sign that Cook didn’t want to make a gold watch. That the Apple Watch Edition is a vanity project for Jony Ive, a luxury watch aficionado who rides in a Bentley to work every day. A $10,000 watch (or even $17,000, the highest priced model) is not Apple. While the company is often criticized for selling products at prices higher than competitors, Apple has always backed these prices up with higher quality and better design. Apple has never been a company of bling, and the Apple Watch Edition is bling, nothing more.

Apple will sell a few, to rich people wanting to stand out from the rabble who buy the cheaper models. But the Apple Watch Edition is very much an un-Apple product.

16 thoughts on “Thoughts on the Apple Watch Edition

  1. That might explain why the link bracelet is $449. It’s difficult to manufacture and there is a lot of manual labor.

    FWIW, I saw a tweet that said the gold watch weighed 69 grams, or more than two Troy ounces. Is it milled from a solid piece like the others, or is it cast?

  2. That might explain why the link bracelet is $449. It’s difficult to manufacture and there is a lot of manual labor.

    FWIW, I saw a tweet that said the gold watch weighed 69 grams, or more than two Troy ounces. Is it milled from a solid piece like the others, or is it cast?

  3. Your watch “expert” is being more than a bit disingenuous about the markup for solid gold watch casings. Yes, the price of the BASE watch has much to do with the quality of the mechanicals and the precision hand-built workmanship. But the markup on a gold model? Well, in your own words, ” It’s the same watch with a different case.”

    Examine the search results on this page – specifically items 331.10.42.51.02.002 and 331.53.42.51.02.002. This is the Omega Speedmaster (WONDERFUL watch, btw, and if you were investing in a quality Swiss timepiece, this would be the one I would unreservedly recommend) with the exact same workings, face, measures, everything … the only difference is the gold case .vs. stainless:

    http://www.watchesonnet.com/catalogsearch/result/?q=42.51.02.002

    That is a FIFTEEN thousand dollar markup for the gold case. It doesn’t matter whether the case contains a cheap-ass quartz movement or a hand-built in-house movement – in the personal luxury world. the markup on the same watch for gold is a fast 15K.

    This is the classic “comparing apples (the eating kind) to oranges” problem. Your “expert” compared a gold apple to a gold orange – and that is a meaningless comparison. He should have compared a steel apple to a gold apple and THEN a steel orange to a gold orange – and afterwards balanced the two differences.

    If anything, Apple is moving the bar for “the same watch with a different case” lower rather than higher. These prices – especially for the gorgeous stainless link bracelet that everyone seems to be up in arms about – are eminently fair. I don’t think Tim Cook was embarrassed at all.

    • I’m amazed how many people are defending these markups as though they’re normal. What you’re paying for, over and above the cost of the gold, and different metallurgy, to create the case, is marketing and hype.

      I’m seeing that luxury watches are just like audiophile equipment… 🙂

      • But that is the thing – they ARE normal in this market. If anything, I myself was a bit disingenuous by choosing the Omega as my example – but I went with a product I know at the risk of undermining my own argument. If you do the same exercise with a Chopard or a Rolex, that markup will move to 25K for the dreaded “same watch in a different case”. That is simply how this particular retail segment works.

        Oh – since the bracelet is also in play here as part of the other comment, it might interest you to know that a replacement bracelet for that stainless Speedmaster will set you back 695 dollars. That is a nice bracelet (the traditional Omega “broad arrow” design) but it is nowhere near as nice as the Apple bracelet – not in design, not in execution, not in anything. In fact, Apple may have set a new bar for the quality and design of link bracelets that will have the other luxury watch makers scrambling a bit.

        This is a new market for Apple (interestingly, the three models of the Watch target three very different market segments – on purpose, I think – and only one of them any place Apple has ever had a presence in before) and as such a completely unknown market for the vast majority of the tech press. But the fact that the market is new doesn’t change how it works – Apple is playing fair and square by the rules (or maybe not so fair, if you realize that they are running smaller markups than everyone else) as they currently exist.

        This IS the normal for one smallish segment of Apple’s new venture. For normal people, there are sport and standard models. And that’s just fine, I think.

      • After all of that, however, your expert was right in one thing – this is NOT a watch as he knows it. It’s a personal electronic device and will be obsolete soon and non-functional at some foreseeable point beyond that. It’s not the same thing at all.

        Would I pay 6K for a premium Swiss watch? Yes, of course – that’s an investment. It’s a beautiful device that blends engineering and art and craftsmanship and a little bit of magic on your wrist and if you take care of it, it will literally last forever. Would I pay 10K … or even 6K … for the Apple Edition? Not a chance – its folly.

        But for the people who buy 5-figure personal items? It’s not folly at all – they will happily pay that again next year for the Edition 2. The only folly there would be if Apple didnt take as much of their money as they could.

  4. Your watch “expert” is being more than a bit disingenuous about the markup for solid gold watch casings. Yes, the price of the BASE watch has much to do with the quality of the mechanicals and the precision hand-built workmanship. But the markup on a gold model? Well, in your own words, ” It’s the same watch with a different case.”

    Examine the search results on this page – specifically items 331.10.42.51.02.002 and 331.53.42.51.02.002. This is the Omega Speedmaster (WONDERFUL watch, btw, and if you were investing in a quality Swiss timepiece, this would be the one I would unreservedly recommend) with the exact same workings, face, measures, everything … the only difference is the gold case .vs. stainless:

    http://www.watchesonnet.com/catalogsearch/result/?q=42.51.02.002

    That is a FIFTEEN thousand dollar markup for the gold case. It doesn’t matter whether the case contains a cheap-ass quartz movement or a hand-built in-house movement – in the personal luxury world. the markup on the same watch for gold is a fast 15K.

    This is the classic “comparing apples (the eating kind) to oranges” problem. Your “expert” compared a gold apple to a gold orange – and that is a meaningless comparison. He should have compared a steel apple to a gold apple and THEN a steel orange to a gold orange – and afterwards balanced the two differences.

    If anything, Apple is moving the bar for “the same watch with a different case” lower rather than higher. These prices – especially for the gorgeous stainless link bracelet that everyone seems to be up in arms about – are eminently fair. I don’t think Tim Cook was embarrassed at all.

    • I’m amazed how many people are defending these markups as though they’re normal. What you’re paying for, over and above the cost of the gold, and different metallurgy, to create the case, is marketing and hype.

      I’m seeing that luxury watches are just like audiophile equipment… 🙂

      • But that is the thing – they ARE normal in this market. If anything, I myself was a bit disingenuous by choosing the Omega as my example – but I went with a product I know at the risk of undermining my own argument. If you do the same exercise with a Chopard or a Rolex, that markup will move to 25K for the dreaded “same watch in a different case”. That is simply how this particular retail segment works.

        Oh – since the bracelet is also in play here as part of the other comment, it might interest you to know that a replacement bracelet for that stainless Speedmaster will set you back 695 dollars. That is a nice bracelet (the traditional Omega “broad arrow” design) but it is nowhere near as nice as the Apple bracelet – not in design, not in execution, not in anything. In fact, Apple may have set a new bar for the quality and design of link bracelets that will have the other luxury watch makers scrambling a bit.

        This is a new market for Apple (interestingly, the three models of the Watch target three very different market segments – on purpose, I think – and only one of them any place Apple has ever had a presence in before) and as such a completely unknown market for the vast majority of the tech press. But the fact that the market is new doesn’t change how it works – Apple is playing fair and square by the rules (or maybe not so fair, if you realize that they are running smaller markups than everyone else) as they currently exist.

        This IS the normal for one smallish segment of Apple’s new venture. For normal people, there are sport and standard models. And that’s just fine, I think.

      • After all of that, however, your expert was right in one thing – this is NOT a watch as he knows it. It’s a personal electronic device and will be obsolete soon and non-functional at some foreseeable point beyond that. It’s not the same thing at all.

        Would I pay 6K for a premium Swiss watch? Yes, of course – that’s an investment. It’s a beautiful device that blends engineering and art and craftsmanship and a little bit of magic on your wrist and if you take care of it, it will literally last forever. Would I pay 10K … or even 6K … for the Apple Edition? Not a chance – its folly.

        But for the people who buy 5-figure personal items? It’s not folly at all – they will happily pay that again next year for the Edition 2. The only folly there would be if Apple didnt take as much of their money as they could.

  5. There are people who will spend $10,000 on a 1st class plane flight, or $5,000 on a dress they’ll wear just once. It’s wrong to think about a luxury good in terms of utility. Moreover, it increases the halo effect in the mind of the consumer for the Apple brand and the Apple Store (itself a marketing tool and mecca where only around 10% of Apple product sales are made).

    Microsoft and Samsung can open their own stores across the street from Apple, but if Apple’s foray into luxury goods is successful it won’t be in the number of gold watches it sells it will be in the minds of people who will see it like a McDonalds across the street from a good steak house (where some prices are astronomical, yet where people can still affordably eat) .

  6. There are people who will spend $10,000 on a 1st class plane flight, or $5,000 on a dress they’ll wear just once. It’s wrong to think about a luxury good in terms of utility. Moreover, it increases the halo effect in the mind of the consumer for the Apple brand and the Apple Store (itself a marketing tool and mecca where only around 10% of Apple product sales are made).

    Microsoft and Samsung can open their own stores across the street from Apple, but if Apple’s foray into luxury goods is successful it won’t be in the number of gold watches it sells it will be in the minds of people who will see it like a McDonalds across the street from a good steak house (where some prices are astronomical, yet where people can still affordably eat) .

  7. One more thought: Apple doesn’t really care if they sell 100 or 1,000 gold watches; they’re planting a flag in mindshare that says to people “I can get a similar high quality *experience* that others pay 30x for.” Whether this is a valuable road to go is a different question, but Apple’s recent hires suggests it intends to rebrand itself to be seen as a high end brand whose normal products may be slightly more expensive … but offer the functionality that a multimillionare pays a lot more for.

    To see where the real pricing sweet spot is, consider that if you want a leather band the cheapest option is the $349 watch plus $249 modern buckle … but for just $51 more you can get the stainless watch (with ceramic back and sapphire crystal) with the classic leather buckle.

  8. One more thought: Apple doesn’t really care if they sell 100 or 1,000 gold watches; they’re planting a flag in mindshare that says to people “I can get a similar high quality *experience* that others pay 30x for.” Whether this is a valuable road to go is a different question, but Apple’s recent hires suggests it intends to rebrand itself to be seen as a high end brand whose normal products may be slightly more expensive … but offer the functionality that a multimillionare pays a lot more for.

    To see where the real pricing sweet spot is, consider that if you want a leather band the cheapest option is the $349 watch plus $249 modern buckle … but for just $51 more you can get the stainless watch (with ceramic back and sapphire crystal) with the classic leather buckle.

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