Tony Sun, Lux Research08.14.15
Recently there have been many estimates around the sales number of the Apple Watch in the first three months since its debut. Almost all estimates point to a very small number of the $10,000+ Apple Watch Edition.
For example, Slice Intelligence estimated about 1,900 Apple Watch Editions were sold while other versions sold 1 to 2 million units in the same period of time. However, the sales figure is not an effective way to measure the influence of the significantly more expensive model. Since the Apple Watch Edition is a limited-run product, it will not generate huge revenues, but will lead to a halo product that other smart watch developers like Samsung or Pebble do not have.
Within other industries like fashion and luxury, this idea is sometimes known as the luxury pyramid – a halo product at the top of the pyramid, whose image defines the brand, and leads to mass-market sales at the bottom of the pyramid, where the real revenues are made. Apple’s branding approach here is quite ambitious: the $10,000+ price tag itself is a tool to market the basic models, because it puts the luxurious Apple Watch Edition to the side of traditional luxury mechanical watches like Rolex, Omega and Tag Heuer.
From the estimates and disclosed figures, it is still unclear if Apple can successfully pull off this strategy as, say, a Rolex or a Louis Vuitton, because Apple Watch Edition will become technologically obsolete in a few years, which a high-end mechanical watch or handbag will not.
One way to balance technology and luxury is to add high-end, personalized services to the devices. For example, Vertu, a luxury mobile phone developer, is still selling relatively outdated smartphones (one of its models has small, 2-inch QVGA non-touch displays, developed in 2006). Buyers nonetheless pay more than $16,000 for these phones, and enjoy complementary access to services like 24-hour worldwide assistance, recommendations, and priority bookings.
Apple and other developers may therefore look to provide a special user experience like Vertu in the future. Either way, Apple’s pricing strategy is a new take on smartwatches – they still lack a killer application, but this marketing approach may push the Apple Watch into the mainstream. If it does, the market should expect other brands to follow, either via in-house marketing efforts or through acquisitions and partnerships – for example, Tag Heuer partnering with Intel to develop their luxury smartwatches.
Tony Sun is an analyst on the Wearable and Flexible Electronics Intelligence team at Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. Sun holds an master’s degree and Ph.D. in physics from Boston College and obtained his bachelor’s degree in physics from Peking University in Beijing, China. For more information, visit Lux Research.
For example, Slice Intelligence estimated about 1,900 Apple Watch Editions were sold while other versions sold 1 to 2 million units in the same period of time. However, the sales figure is not an effective way to measure the influence of the significantly more expensive model. Since the Apple Watch Edition is a limited-run product, it will not generate huge revenues, but will lead to a halo product that other smart watch developers like Samsung or Pebble do not have.
Within other industries like fashion and luxury, this idea is sometimes known as the luxury pyramid – a halo product at the top of the pyramid, whose image defines the brand, and leads to mass-market sales at the bottom of the pyramid, where the real revenues are made. Apple’s branding approach here is quite ambitious: the $10,000+ price tag itself is a tool to market the basic models, because it puts the luxurious Apple Watch Edition to the side of traditional luxury mechanical watches like Rolex, Omega and Tag Heuer.
From the estimates and disclosed figures, it is still unclear if Apple can successfully pull off this strategy as, say, a Rolex or a Louis Vuitton, because Apple Watch Edition will become technologically obsolete in a few years, which a high-end mechanical watch or handbag will not.
One way to balance technology and luxury is to add high-end, personalized services to the devices. For example, Vertu, a luxury mobile phone developer, is still selling relatively outdated smartphones (one of its models has small, 2-inch QVGA non-touch displays, developed in 2006). Buyers nonetheless pay more than $16,000 for these phones, and enjoy complementary access to services like 24-hour worldwide assistance, recommendations, and priority bookings.
Apple and other developers may therefore look to provide a special user experience like Vertu in the future. Either way, Apple’s pricing strategy is a new take on smartwatches – they still lack a killer application, but this marketing approach may push the Apple Watch into the mainstream. If it does, the market should expect other brands to follow, either via in-house marketing efforts or through acquisitions and partnerships – for example, Tag Heuer partnering with Intel to develop their luxury smartwatches.
Tony Sun is an analyst on the Wearable and Flexible Electronics Intelligence team at Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. Sun holds an master’s degree and Ph.D. in physics from Boston College and obtained his bachelor’s degree in physics from Peking University in Beijing, China. For more information, visit Lux Research.