apple-watch

The announcement that the Apple Watch Edition will start at $10,000 and be priced all the way to $17,000 when it begins shipping April 24 perplexed many. Apple is a consumer electronics company. Why is it trying to jump into the luxury space?

Here’s your answer. On Thursday, Andreessen Horowitz analyst Benedict Evans penned a blog post on why Apple is bothering to sell the Apple Watch Edition. It’s full of some brilliant analysis of the new, luxury product, but it boils down to something simple – it’s a marketing tool for Apple.

Apple stores are huge rich-media billboards on every major shopping street in the developed world: I can’t think of any other company that has shops as big as that in such premium locations in as many places. Apple retail is a self-funding marketing operation. So too, perhaps, is the gold watch. Apple might only sell a few tens of thousands, but what impression does it create around the $1,000 watch, or the $350 watch? After all, the luxury goods market is full of companies whose most visible products are extremely expensive, but whose revenue really comes from makeup, perfume and accessories.

The gold Apple Watch Edition is a way for Apple to put attention on its less expensive Apple Watch offerings. Apple doesn’t even plan to sell a ton of the Edition watches, as the company has already said they’ll be available in limited quantities.

Evans compares the Apple Watch Edition to other luxury goods/brands:

You sell the $50k (or more) couture dress (which may be worn once), but you also sell a lot of lipsticks with the brand halo (and if you think Apple’s margins are high, have a look at the gross margins on perfume). 

The luxury Apple Watch Edition as a marketing tool became even more apparent over the weekend when Apple began hanging back-lit displays for the Edition in its Apple Stores across the globe. Why market a product you’re not planning to sell millions of? It’s in place to create a sense of luxury around the Watch product as a whole.

Evans also points out that at $349, the entry-level Apple Watch Sport is the cheapest price Apple has ever offered a new product.

Source: Benedict Evans