“Apple Inc. is embracing a luxury name with its new $1,500 smartwatch with French fashion house Hermès. But Apple design chief Jonathan Ive resists the notion that Apple is becoming exclusive, a defining characteristic of luxury goods,” Christina Passariello reports for The Wall Street Journal. “‘We don’t think in those terms,’ Mr. Ive said in an interview Wednesday, after the Apple Watch Hermès was unveiled. ‘I’m not comfortable with words like exclusive.'”
“For Apple’s first tie-up with a luxury-goods brand, Mr. Ive went for the crème de la crème. Hermès International SCA, whose customers wait months to buy five-figure Kelly bags, is the most elite of the major luxury-goods houses,” Passariello reports. “Mr. Ive and Hermès artistic director Pierre-Alexis Dumas explained how the watch came to be in a joint interview after the event.”
“To make Apple Watch Hermès, Apple had to break some traditions. Mr. Ive approached Hermès about collaborating on a watch last year, before Apple had announced its first wearable device. ‘It’s something highly unusual for Apple to do—to talk about an unannounced project,’ said Mr. Ive, 48 years old. They decided to partner over lunch in Paris, where Hermès is based, last October,” Passariello reports. “To display the time, Apple adapted three fonts Hermès has long used in its watches. When the watch face displays the Hermès user interface, neither the Apple name nor logo is visible. Allowing Hermès’ symbols to upstage Apple’s is a first, Mr. Ive said. ‘I’ve been at Apple 23 years and this is conspicuous and singular. I’ve never known anything like this,’ he said.”
“The new watch isn’t Apple’s or Hermès’ most expensive watch. Hermès watches with quartz movements sell for more than twice as much. Apple offers two versions of its gold-encased Edition model for $17,000,” Passariello reports. “The Apple Watch Hermès ‘attracts consumer interest, and provides a ‘cool’ spin on what was so far a ‘geek’ product,’ says Exane BNP Paribas analyst Luca Solca.”
MacDailyNews Take: Blah, blah, blah, Luca; bland nothingness with no basis in the facts, given the existence of the much more expensive and exclusive Apple Watch Edition line from the get go. If you’re going to give a boring statement, at least make it factual.
Passariello reports, “Hermès, too, has something to gain from working with Apple: proving that its 178-year-old brand can be contemporary… ‘We are a new tradition and an age-old tradition, and we meet at the center of the arch,’ said Mr. Dumas, 49.”
Read more in the full article, including what was done to get the Double Tour band to work properly with Apple Watch Hermès, here.
MacDailyNews Take: The Apple Watch Hermès collection is absolutely stunning and, regardless of what Jony says, emanates a healthy measure of exclusivity – which isn’t a bad thing at all.
SEE ALSO:
Apple and Hermès collaborate on luxurious Apple Watch Hermès collection – September 10, 2015
Apple and Hermès unveil the Apple Watch Hermès collection – September 9, 2015
That Double Tour leather band is instantly recognisable. I like that. And that they trusted Hermès to keep the Apple Watch secret is huge.
Every major luxury fashion brand will want in on this. (Ironically they will be better able to adjust to the new reality than the Swiss watch manufactories.)
It doesn’t hurt Apple at all — everyone will know it’s an Apple product. But this development just *definitively* answered the question of whether Apple can be a high-end luxury brand.
From a research note I sent out today to my paid subscribers:
“It has puzzled many, including myself, why anybody would pay $17,000 for a watch that has the same functions as a $369 model from the same manufacturer. Certainly the material used in the case and clasps would be a factor, But the amount go gold used in the $17,000 Apple Watch Edition only raises its COG by about $600. Certainly not enough to justify an increase in price of ~$16,500.
The justification of the higher price is not the increase in COGS (in the minds of buyers) but rather it is the BRAND name.
Apple is considered a luxury brand, but not enough as to command 5 digit prices.
I estimate Apple’s COGS of the Apple Watch Edition at (being generous) ~$1,266. With a net ASP of $5,000 the Apple Watch Edition generates 75% Gross Margin.
With a COGS of $5,000 plus $2,000 branding cost an Apple Watch Roles (pick your poison) generates >50% Gross Margin (after deducting Cost of Sales) for Rolex et al. By establishing the $17,000 price point Apple has created the headroom to private label the Apple Watch to luxury brand manufacturers, just as Apple has done with Hermes (Apple Watch Stainless Steel with Hermes branding $1,250 vs Apple Watch Stainless Steel at $1,099).
From the consumer’s point of view they are paying a $151 premium for the Hermes brand, while Hermes is making >40% after all costs.
With this strategy Apple neutralizes competition from the luxury brands and makes, at minimum, 55% Gross Margin on the increment in sales. Further, by associating the Apple brand with brands such as Hermes, Breitling, Tag Heuer, Patek Philippe, Cartier and Rolex et al, the strategy increases the brand value of the Apple Watch Sport model.
I think this is the true motive behind the Stainless Steel and Edition models/price points.”
Just one catch. Hermes can do this because they are a luxury fashion brand and *not* a watch company.
They have from time to time over the last 100 years put their name on the dial of several nice timepieces made by others, but they only seriously got into the watch space in very recent years. They just decided to try to cash in on the watch thing when Apple happened.
They derive almost none of their revenue from watches, and so have nothing to lose by backing Apple’s watch line.
Of course Angela Ahrendts knew the back-story on all of this, and was able to exploit it.
Apple doesn’t need the Swiss companies to come along. There are plenty of French and Italian brands more than happy to make accessories (and co-branded products).
Hmm. Sloppy writing on my part.
I meant to say something like:
“They had only just decided to try to cash in on the “watch thing”, and then Apple happened.
I think this is one more brilliant step for Apple. Not simply compete but merge with the watch industry on many facets.
Hermes can’t make an Apple Watch, so Apple did for them and went to Hermes to show them how to stay relevant, in the digital age. It’s not a replacement one way or another. It’s an expansion for Hermes and foundation for Apple.
With this you can’t knock Apple off that pedestal.
Expect more from this, more brands – more Apple Watch!
Nice work. You “get it”.
Style over substance, the new mantra at Apple.
Opinions without intelligence. Nothing new here.
You shouldn’t be so hard on yourself, gregg.
Meh.