Sure, some researchers estimate that 7-million to 11-million of the device will have been sold by the end of 2015, and that number, whether too high or too low far exceeds all other smartwatches combined. What makes Watch too expensive?
The Apple Sale
Those of us experienced in the Way of Apple™, know the basics. Apple’s gross margins on every major hardware product are, well, there’s no other way to say it; gross. Or, maybe grossly profitable. Apple prices nearly everything at the high end of the product spectrum and Watch is no different, starting out at $349 and $399 for the smaller and larger models, respectively.
That’s what you would expect of Apple, right? That’s what we’ve got. There’s just one problem. Apple is able to manufacture Watch in great quantities; by the millions to tens of millions so getting the larger number into the product pipeline and through the distribution channel to customers is a multi-faceted challenge.
How can you tell Watch is too expensive? Look at the sales price. Wait. You’re thinking, “Wil, Apple doesn’t really have sale prices.” That’s true. It’s unlikely you’ll walk into an Apple Store and get a new Mac, iPhone, or iPad for 25-percent off. That’s not Apple. Our favorite Mac maker uses partners to do the dirty work of discounting products.
Best Buy has been selling Watch for $100 off. How does that make you feel, early adopter? Other retailers have begun discounting Watch for the holiday shopping season. Despite far lower prices, most smartwatch competitors haven’t made much of a dent in the universe and do not appear to have stymied Apple Watch unit sales, so why should Apple bother to help partners move more units by allowing a discount?
Watch 2 is coming. The warehouses are full of Watch 1. Something has to give and the first place to start is with buy this, get a Watch at a discount bundles (which amount to a discount), and then sale prices (the obvious discount). Both are needed– and have been implemented already– to get the large Watch inventory down to manageable levels before Watch 2 is introduced.
Watch 2? Yes, Watch 1 will be a year old this spring, so Watch 2 must be on the way, right? If a product has too much inventory then discounts are used to increase demand which reduces supply. It’s basic math.
That said, my gut feel across the board is that Apple’s prices– on everything– are a little too high in the face of economic doldrums which seem to permeate the rest of the world. An iPhone can be priced at nearly a thousand dollars which happens to be about the same as a fully tricked out iPad Pro and just under the entry-level MacBook.
Don’t get me started on Apple TV. While all of us expect it to be the gateway drug to dropping the cable TV company in the future, the future isn’t here yet, so we’re saddled with an Apple TV 4 platform that can cost nearly triple the Apple 3 ($69) but at least double the previous version and if tvOS app developers are telling the truth, Apple TV 4’s sales are not that good and app sales are even worse.
We’re still early in the holiday shopping season and a new year is around the corner so there is plenty of time for Apple to get manufacturing, inventory, sales channels, and customer demand into some sort of acceptable sync, but for now, Apple Watch is too expensive. And so is Apple TV.