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Changing Strategy, Apple Promotes Its New Watch as a Luxury Item

Changing Strategy, Apple Promotes Its New Watch as a Luxury Item

By Brian X. Chen, The New York Times | Updated: 20 April 2015 16:14 IST

Apple has scrapped its usual routine for releasing products with its new device, the Apple Watch. The company is instead taking a page from the playbook of another industry: luxury-goods makers.

Gone are the long lines in front of Apple stores that would accompany a typical iPhone release. Gone is the flooding of a vast, worldwide distribution network where Apple would make a new iPhone available. The company is selling the Apple Watch, which goes on sale on Friday, in just nine countries, and exclusively through its own channels, not through third-party retailers like Best Buy.

In contrast, Apple unveiled new iPhones in September in more than 30 countries and in numerous retail outlets.

For the first time, Apple is also bringing personal attention and tailoring into the mix through a try-on process for the watch. While consumers typically could not touch a new Apple device until it was publicly available, the company this month began inviting customers into its stores to see, wear and feel the watch.

Evan Weissbrot, a 33-year-old watch collector, experienced the sneak preview firsthand. After he arrived at an Apple Store in New York on April 11, an Apple employee took Weissbrot to a try-on station and unlocked a drawer containing a variety of the watches. In between small talk, the employee showed Weissbrot different straps and cases - and even let him check out the gold watch, which costs more than $10,000 and typically requires a separate appointment to try on.

The amount of personal attention and the allure of the try-on process "was a rip directly from a high-end watch store," Weissbrot said.

All of this echoes the tactics of luxury-goods makers like Burberry and Hermes. Giving consumers an early peek before they buy things is a familiar strategy in the fashion industry - as, increasingly, is tempting early adopters with the bonus of circumventing the shop. When Burberry shows new lines of clothing and handbags on the runway, the company lets customers order select items immediately after the show for delivery even before the apparel arrives in stores.

(Also See: Apple Watch to Boost 'Glance Journalism')

Apple also appears to be mimicking the scarcity-creates-desire approach, one that has served Hermes well with items like the Birkin and Kelly bags. They are rarely in stock, and customers must wait months to receive one. That strategy has also worked for companies like Ferrari, which has loyal customers who pay thousands of dollars just to get on a list to wait as long as a year to own the next hot Italian sports car.

"They're definitely treading on new territory," Milton Pedraza, chief executive of the research firm the Luxury Institute, said of Apple.

While high-end fashion brands, jewelers and luxury-car brands often use selectivity and personal attention to generate interest when a product makes its debut, it is new for Apple, a company whose products typically speak to an enormous consumer audience as opposed to a privileged few, he said.

The strategy is a deliberate move by Timothy Cook, chief executive of Apple, and Angela Ahrendts, the company's retail chief and a former chief executive of Burberry, to lay the groundwork for a successful introduction of the watch. The watch is the first entirely new device Apple has introduced under the leadership of Cook, who took the helm in 2011, and brings the company into the fashion market, as well as the luxury market with the 18-karat gold version of the watch.

In a recent letter to Apple's retail employees, Ahrendts said the company needed to come up with the preview approach for selling the watch because "there's never been anything quite like it." In the memo, which was cited by the blog 9to5Mac, she said it was unlikely that people could buy the watch at Apple stores before June because of supply constraints.

An Apple spokeswoman, Amy Bessette, said Ahrendts was not available to comment on the retail strategy for the watch.

(Also See: Apple Watch May Not Be Available to Buy in Stores Until June)

Apple's top brass has been energetically promoting the watch over the last seven months, granting interviews about the creation of the device to The New Yorker and Wired. Apple has also invested significantly in advertising, spending an estimated $36 million since March 9 on a television campaign for the smartwatch, just slightly less than the $38.5 million that Apple spent on TV ads for new iPhones since mid-November, according to iSpot.TV, an analytics firm.

The watch's success remains far from assured. Cook said on Apple's financial earnings call in October that the company would report sales of the watch in a group with other products, rather than breaking it out into a separate category.

"I'm not very anxious in reporting a lot of numbers on Apple Watch and giving a lot of detail on it because our competitors are looking for it," Cook said.

Sales estimates for the watch are modest compared with Apple's past best-sellers. Toni Sacconaghi, a financial analyst for Sanford C. Bernstein, predicts Apple will ship 7.5 million watches in the second half of the company's fiscal year while tens of millions of iPhones fly off the shelves every quarter.

For now, Apple's luxury experiment with the Apple Watch appears to be bringing in mixed results. At Apple's London flagship store nine days ago, employees asked people if they wanted to sign up for personal appointments to get hands-on with the product. Several people were bemused that they could not handle the watches without appointments.

At an Apple store in Hong Kong, a Chinese tourist from Beijing, Scott Sun, took photos of the gold watches to send to his friends, but said every version of the watch - which starts at $350 - was too expensive for him.

"There's no way I'm going to buy one," he said. "But for rich people, this gold one will definitely be popular."

Another question raised by Apple's luxury experiment with the watch is whether customers will believe it is worth the wait. While the watch will begin shipping to customers on Friday, some customers have reported that their shipping times have slipped to May or June.

For Weissbrot, the watch collector in New York, the wait was not a deterrent. He placed an online order for an Apple Watch Sport, which is the least expensive model and has an aluminum case, before the try-on session. The estimated date of arrival for his watch is May 13.

"It's kind of a bummer," he said, before adding that he was still excited to be among the first to have the device.

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