This is a masterful piece; probably one of Gruber’s best. The pricing of the Watch intrigues me, particularly this part:
I think Apple Watch prices are going to be shockingly high — gasp-inducingly, get-me-to-the-fainting-couch high — from the perspective of the tech industry. But at the same time, there is room for them to be disruptively low from the perspective of the traditional watch and jewelry world. There’s a massive pricing umbrella in the luxury watch world, and Apple is aiming to take advantage of it.
This is true, but there was a similar story in the luxury car world. Back in the early 2000’s, your choices for a large luxury automobile were quite boring. At the less-expensive end, you could buy a Lexus LS-series for about $60,000; they were nice cars, but fairly uninteresting. Or, you could be a traditionalist and buy one of the Audi A8, the Mercedes S-class, or the BMW 7-series. Nothing wrong with any of those, but they were all eye-poppingly pricey and a bit too traditional.
Volkswagen decided that they could compete in this space, so they built the Phaeton. It was priced between the Lexus and the Audi, but was far more technologically advanced than anything out there. Apparently, Volkswagen’s then-chair Ferdinand Piëch created a list of ten criteria the car must excel at, and this was a tall order:
Allegedly, the then-VW boss insisted that the Phaeton’s four-zone air-conditioning could maintain a 22 degrees Celsius cabin temperature after eight hours driving at 300km/h in 55 degree heat; and that its torsional body rigidity should exceed an impressive 37,000Nm per degree.
The Phaeton was arguably the most advanced car to exist in 2002. But, though it slotted into the price gap left in the luxury car market with something far superior to anything else, it failed spectacularly. Volkswagen simply didn’t have the brand cachet to compete in the luxury car space. If you’re dropping near-six-figures on a car, you’re probably going to want the badge to reflect that.
Apple faces a similar hurdle in the watch space, though not to the same degree. They clearly have some luxury brand cachet, and they’re definitely not going to be competing directly with Rolexes and Pateks, so they don’t need nearly that much. The “Edition” is clearly going to sell far fewer models than either of the other two,1 but I’m curious to see if we’ll see one on Jay-Z’s wrist, for instance. It’s a big, bold move for Apple.
I’d wager that the Sport will sell more than the Edition and Watch combined ↩︎