People ask me, “How the fuck does Apple dare to price this watch at $18,000?!” Granted, most of these people are representatives of the American “contemporary middle class.”
This basically means that economic and social changes of the past few decades completely cut them out of the luxury goods market, its prices and its intricate marketing strategies. While their well-employed fathers could still afford to splurge a portion of year-end bonuses on nice presents for their mothers at Saks or Tiffany, these people have no need to be bothered with prices of products that carry such labels as Hermes, Chanel, Bottega Veneta, or Rolex. It’s far beyond their purchasing powers and (altogether now!) it’s only gonna get worse.
Even if they get bonuses, they need to spend them right away on far more immediate needs – like replacement of a broken kitchen appliance, a leaky roof, or urgent car repairs. They already borrowed against their 401k to cover the ever-escalating costs of their children’s after-school activities; and the astronomic college tuition… hmmm, they will deal with that when the time comes.
The only reason they even know about the Apple Edition Watches ($10,000-$18,000) is because they are featured next to Apple Watch ($550-$1,000) and Apple Watch Sport ($350-$600) on Apple.com and are on display in the brick-and-mortar stores. The pictured watch was showing itself off right on the front page of Apple’s site until literally a few days ago. So, even if you needed some $19.99 cable, you would’ve seen it.
In an unprecedented move, Apple decided to capture both mass and luxury markets – at the same time and through the same outlets. And guess what? All watches, regardless of their prices, were snatched away within the first three minutes of the original release, thus proving the marketing strategy a total success (well, at least its initial stage).
The supply and demand stimuli worked precisely as if it were a case in an Economics textbook: the cheaper pieces attracted many buyers with their relative value, while the alluring high prices of the gold Apple watches made them even more desirable to those who can afford to shell out this kind of money for a miniaturized iPad.
So, why shouldn’t then a brand charge such prices for its high-end products if the market is willing to bear them? This constantly happens in the third-world countries, which consist of a vast majority of desperately poor people and a roomful of incredibly wealthy ones, with no middle class in-between. Already expensive as is, luxury items are priced two, sometimes three times higher in those countries than in Western Europe or the US. A pair of Prada shoes that can be bought on 5th Avenue in NYC for $750 will carry a $2,200 price tag in Moscow. And again, why not? The general population wouldn’t be able to afford them at any price, while the rich and powerful feel no difference between $750 and $2,200.
Of course, you need an extra-special kind of gall to sell exactly the same electronic gadget at a 3000% price differential just because you placed it in a bit of 18K gold (and it’s absolutely irrelevant how fancy the process of creating that 75% gold alloy is – it’s still the same metal). I mean, a gold Rolex costs only 3-4 times more than the same model in stainless steel; not 30 times more! Moreover, Apple as a brand has no track records in metallurgy, watch-making, or jewelry designing to support the exorbitant prices!
A big portion of the premium prices charged for the established luxury goods have nothing to do with the label frenzy – it is supported by decades, sometimes centuries, of extraordinary workmanship, continuous ingenuity of designs, and the unreachable standards of quality. I mean, Abraham-Louis Breguet started making watches in 1775; Louis XVI and Marie Antoinette were his clients! Every Hermes bag is still made by hand in France according to the quality requirements established in 1837. The ownership of these items lasts for a very long time – they are passed from one generation to the next. What will the owner of an Edition Watch pass onto his children? A bit of scrap gold that surrounds a piece of an outdated electronic junk?
Nevertheless, I applaud Apple for being absolutely honest about it and not hiding the reality behind some bullshit political-correctness curtain. It is what it is: We live in a society marred by a chasm of monetary division that constantly expands at a speed of light, with a handful of those who can afford whatever without even checking the price, including the damn Apple Edition Watch, and everybody else.
And it doesn’t matter that the overpopulated side can be further divided into those who will go for a $1000 watch vs. the ones who will settle for the $300 one vs. those who cannot afford anything at the Apple store at all. Even though our wages vary and, more importantly, we make different choices (a professional woman who decides not to have a suburban house and multiple kids still can afford a luxury bag or a watch once in awhile), our means are quite comparable. If we are in our right minds, we will not throw away $18K for an Apple watch. The other side, however, can go crazy to their heart’s content.
But the situation does beg the question: Are these the signs that we are fast becoming a third-world country?
The Frustrated CFO 