My post laying out why the gold Apple Watch Edition must cost $10,000 caused quite a stir, but I’ll be the first to admit that I could have it all wrong. It’s entirely possible for them to put together a gold-cased Apple Watch for a much-lower price point, but I’m much more interested in the reasons why: Apple’s manufacturing and retail empire would be seriously disrupted by a $10,000 lump of gold!
How To Make A Gold Watch For Under $10,000
In my last post, I pointed out (hyperbolically) that there are no gold watches available for less than $10,000. This isn’t really true – there are a few small gold-cased watches available below that mark. But comparing these to an Apple watch is (if you pardon the pun), a case of “apples and oranges”: They’re much smaller; they’re round; and they’re not Apple Watches!
This last point is critical: We have no idea how the case of an Apple Watch is constructed. And, more importantly, the components, manufacturing, and sales process is entirely different from a Swiss mechanical wristwatch. My point was simply that Apple’s Watch Edition case looks like a big chunk of gold and that’s an expensive thing, likely pushing the total cost all the way to $10,000 if my assumptions are correct.
But let’s say Apple didn’t want to build, stock, and sell a $10,000 watch but still wanted it to be “crafted from 18-karat gold.” How would they do it?
Our first argument against the $10k solid gold watch is commonality of design and certification. Apple has never (to my knowledge) delivered a device with different models constructed of different materials. Electronics aren’t like watches. They are mass-produced and must be certified for electromagnetic (“RF”) interference. Apple says they’ll deliver Watches in aluminum, steel, and gold, but it would be much easier of all three had an identical internal design and only varied when it comes to the outer skin. (Counterpoint: Commonality inside doesn’t necessarily mean cheap outside.)
This would also make the final product much cheaper, since the “gold case” could be extremely thin and not structural. Note that nowhere does Apple use the term, “solid gold case”, to describe the Watch Edition. I’m no lawyer, but their “crafted from 18-karat gold” boast could be weasel words to describe a conventional Watch wrapped in a thin gold skin.
The lugs and bars (that’s the watch insider term for “the things that the strap attaches to”) as well as the strap buckle could simply be gold plated or even gold colored. This is important because even these seemingly-small pieces would cost hundreds of dollars if they are solid 18-karat gold. That’s how expensive gold is.
One big clue could be the missing gold bracelet. It’s pretty glaring that the steel Apple Watch has two metal bracelets while the gold one only has leather and rubber. A gold watch bracelet has much more gold in it than the watch case itself, so the missing bracelet could be a clue that Apple is trying to keep the price in check. And the mere availability of the rubber strap which, as John Gruber notes, is the same as on the cheapest cheapie in the whole lineup could be another tell. Rubber bracelets are sometimes found on expensive dive watches, but this is no X Fathoms… (Counterpoint: They could add the gold bracelet later as an accessory.)
Combine these clues and we could be looking at a much cheaper watch. It’s still inconceivable to imagine prices less than $1,000, but Apple could definitely finagle a $2,000 Apple Watch Edition. It’s more likely that the Edition would retail over $4,000, but this is a far cry from my earlier assertion that it would cost $10,000!
Why Apple Wouldn’t Want A $10,000 Watch
It’s entirely possible for the “gold” Apple Watch Edition to be way under $10,000, but a more important question is why would Apple do this. After all, those making the decisions are very familiar with the luxury watch market and the incredible prices that gold watches command at retail. Why wouldn’t they want to “pull a Vertu” and cash in if customers are willing to buy?
Let’s return to the cost of gold. Although Apple has produced $10,000 products in the past and currently stocks some pretty expensive devices in the stores, a gold watch is an entirely different animal. Gold is much more fungible than anything else Apple sells, so security is a much more critical issue. Remember the smash-and-grab iPhone heists? How about that pallet of stolen iPhones? Now imagine if those thieves could melt the case down and have an untraceable $4,000 lump of gold instead of some hot electronics.
The high price of gold affects every aspect of my purported solid gold Apple Watch. Where would Apple manufacture a $10,000 watch? Even that little buckle would be worth more than a month’s pay for a Foxconn assembly line worker. And the level of finish required to compete with Swiss watches is not yet possible at scale in China. (Counterpoint: Apple could build the solid gold Watch Edition in Texas alongside the Mac Pro.)
Then there’s shipment and warehousing. Although it is extremely unlikely that Apple would manufacture and ship the millions of gold Watches some analysts suggest, even more modest shipments would be immensely valuable. Securing these shipments from factory to warehouse to freight to warehouse to store will be a real challenge. Apple currently packs as many as 1.5 million iPhones into a single 747, but they couldn’t ship $15 billion worth of Watch Editions this way! Every point of collection and shipping would instantly be a ripe target for criminals. (Counterpoint: Apple already deals with armored cars, security systems, and locked vaults.)
Even the stores themselves would need to be reconfigured. Is Apple ready to add armed guards, armored display cases, and time-lock vaults to their stores? Certainly the smaller stores don’t have space for a private room or boutique for Watch Edition buyers. (Counterpoint: We know they are working on a major redesign of the retail stores already.)
And what about payment? Luxury watch buyers typically pay using wire transfers, not credit cards. Apple must prepare to process five-figure credit card transactions and accept wires. Are they ready to accept the hassle of validating buyers and payments of this size?
Apple also has to worry about what a “1%” product like a $10,000 Apple Watch Edition would say about the company and its buyers. As Adam Fields notes on Medium, Apple will have to abandon their historic focus on “accessible luxury” and fully embrace their new role as a vendor of conspicuous luxury. Already frequently criticized as a maker of status symbols, this would be a lightning rod for Apple: If the gold Watch Edition sells for $10,000, it could spike Apple’s broader reputation and turn away customers rather than attract them.
It seems smart for Apple to skimp on the gold and bring the cost of the Apple Watch Edition to under $4,000. They would still have issues with production, shipping, and security but these would be reduced since they would no longer be dealing with four-figure lumps of fungible bullion.
Yet even at that price the stores will need reconfiguration and the pundits will hurl jokes about the rich. If the company is going to suffer to bring out a gold Apple Watch Edition anyway, why not embrace the change and go solid gold?
That’s why I’m sticking to my original predictions:
- The starting prices will be $7,999 and $9,999
- The Apple Watch Edition will have a solid gold case weighing more than 5 ounces
- If sales go well, Apple will later offer a gold Edition bracelet at $9,999 as an accessory
- The Apple Watch Edition will be offered through certain high-end third-party fashion boutiques and retailers
- Some larger Apple Stores will add a private “Edition Boutique” (but not all)
- A whole line of expensive and exclusive Edition products will appear
- The Edition line will not be available from the online store or by mail
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Style: Smart watch
Tags: Apple, Apple Watch, boutique, gold, retail, security