“Since Edition watches are so much more expensive than the others, even in low relative numbers, they will drive revenue.,” J. M. Manness writes for Seeking Alpha. “At just 1% of unit sales, they provide 23% of revenues. A mere 4% drives over half, and 16% drives a whopping 85% of revenues… Uber-Pessimistic with only 0.1% edition sales, the collection still accounted for 3% of revenue.”
“But the Edition watches have some expenses that the others do not, and these need to be addressed. These are the Cost of Sale (COS) expenses,” Manness writes. “It’s not that the others do not have them, only that they are so much higher for the Edition watches.”
Manness writes, “Apple will have very high margins on the Apple Watch Edition collection, probably in the 65% – 70% range.”
How Manness arrived at this range can be found in the full article – recommended – here.
MacDailyNews Take: We can thank Apple Watch Edition buyers for helping to keep the prices low for Apple Watch and Apple Watch Sport.
[Thanks to MacDailyNews Reader “OldFatGuy” for the heads up.]
Really like the “MacDailyNews Take”. No hatred of the 1% here it seems. I hope they buy them like crazy. 🙂
I think they will buy WATCH EDITION a lot. 😃😍🎉💰💥💵
Apple is coming out with a watch????
This is the first I’m hearing of it………………….
It’s not surprising that the least expensive Edition is a 38mm model (with Sport Band), at $10,000. Surprisingly, the MOST expensive Edition is also a 38mm (not 42mm) model, at $17,000 (with matching gold Modern Buckle).
I don’t think Apple will actually lower the price of the Sport and steel Apple Watch, based on sales success of the gold model. That would be like Apple lowering the price of the iPhone 6, because the higher-margin 6 Plus is more successful than anticipated. Apple will set the price of each model based on profit goals for each model. Any extra profit from the gold model will certainly help in justifying and paying for accelerated development of future Apple Watch tech.
When mdn suggested that edition margins might be lowering pricing of sport and stainless models, I suspect that they meant that the prices for sport and steel announced thus far already reflect the reduction derived from the Editions
I strongly doubt that the other prices are lower because of the Edition. To do so risks too much on the success of the Edition. The Sport and the Watch will be the backbone of sales. There’s no need to tie them to the success of the Edition.
It just doesn’t add up. Why paint themselves into the potential corner of having to raise prices if the Edition sales are not strong?
Apple is looking to this as a very important product. That sort of thing must stand on its own.
You might be right, but imo it’s not so black and white.
There’s a reason they have a retail VP whose best known work came with a luxury brand. I’m thinking that apple has a very strong idea of how well they’ll do at the luxury end of the watch
I think that if the sport and steel watches ARE priced lower because of the existence of the edition model, they’d still be highly profitable. They’d likely have a slightly reduced margin.
Having a mix of products with a luxury component, having luxury margins, gives aple the flexibility to choose margins on the low end that can increase volume, while maintaining very respectable margins across the entire watch category.
That’s not what was suggested. It was suggested that Apple Watch Sport is 349, rather than say 499 for example, because Apple Watch Edition has subsidized the cost of the lower end models.
That was meant to be reply to ken1w
The $349 (and $399) pricing already provides sufficient profit margin to meet Apple’s goal (for that model). Apple has no idea how many Edition models will sell during the first year, while the Sport model will certainly sell in the tens of millions during the first year. Apple would NEVER set the price the price at $349/399 for the most popular model, assuming (unknown) sales of the gold model will “subsidize” an actual price of $499 for the Sport model. Apple might lose money on Apple Watch, if Apple sold 60 million Sport models and only a few million Edition models.
As I said, Apple will (separately) set the price of each model based on (separate) profit margin goals for each model.
All MDN is saying is that the gold watch buyers are helping to pay for the R&D.
Which is specifically what I said… 🙂 And not (specifically) what the MDN Take said.
(Also, any “helping to pay for the R&D” benefit will not be present for the first generation of Apple Watch.)
Yes, but there’s no evidence for that, and it’s not Apple’s way. If anything, it allows a higher price for the middle watch, because of the “decoy” price on the Edition. It’s well known that humans evaluate by comparing. Is a single item a good deal? Who knows. “But look, this other, similar thing is priced much higher, so this is a good deal!”
If a store has model of TV they can’t sell for $400, they place next to a slightly better model “selling” for $1,000. Suddenly the $400 TV is “a good deal.” The $1,000 is a decoy price.
I should add, I *will* be getting the middle Watch, but I think that if the Edition did not exist I would probably get the Sport Watch instead of springing for the “expensive” one. But now that it’s not the expensive one it’s easier psychologically to “step up” to the Watch. 🙂
Enjoy the sales tax on the edition
You think there might also be an additional ‘luxury tax’? 😛
That’s a good point, for people who are merely wealthy and not “obscenely rich.”
If the Edition model is ever sold online by a retailer who is not Apple, and that retailer is not subject to charging sales tax in your state, that would certainly be a money saver… 🙂
OWC does not charge tax on my orders. I recently bought a nice (non-Apple) display for my Mac mini from B&H Photo because they had among the best prices for that particular model (plus free shipping), AND no sales tax for me.
If you’re sweating the sales tax then perhaps the Edition is not the best choice… 🙂
I’m definitely NOT “Edition material.” If I actually bought one, I’d probably never wear it outside the house… 🙂
No sales tax in certain states.
If you are sweating the sales tax then you are looking at the wrong watch.
Like all high end fashion the margins are huge.
More expensive materials, yes.
But, the true weight of that expensive material leads to an exponentiall increase in price.
Apple are attempting to hit two targets, the delivery of a fashion item and the delivery of a new wearable device.
And for the latter to take off they need a volume of sales – any person to person message, haptic pulse etc. requires that your friends have a watch as well as you. So you need classmates, workmates , families etc. to all have them. The entry price therefore has to be low enough to appeal to a lot more an the Fanboy base. Phone purchases are tied contracts in many cases but watchs are a single purchase item.
Margins will be higher for the edition. But also remember inventory will be hard to manage.
Higher cost models always subsidize the lower priced items but then again the volume of the lower priced items help lower component pricing.