Why the Apple Watch price cut – now starting at $299 – is smart thinking

“The new entry level price for picking up Apple’s wearable is $299, for the smaller sized [38mm] Sports model,” Natasha Lomas reports for TechCrunch. “Does that price drop mean Apple has realized it has an expensive dud on its hands and is desperately trying to entice buyers to think otherwise? In a word, no.”

“An early price-cut for an Apple device is not unexpected, given the company’s past pricing strategies,” Lomas reports. “It’s also smart business if you make money off selling an interconnected ecosystem of devices and accessories, as indeed Apple does.”

“Apple has not reduced the prices of the additional Watch bands it sells. So while Apple’s core wearable is now a little cheaper, the Apple-made Watch accessories are holding steady,” Lomas reports. “When you look at the pricing of those Watch band accessories it’s pretty clear where the biggest Apple hardware margins are being made: accessories.”

Read more in the full article here.

MacDailyNews Take: Fitbit is hating life today.

SEE ALSO:
Apple Watch predicted to capture 50% market share in 2016 – March 17, 2016
Canalys: Apple shipped over 12 million Apple Watches in 2015, two-thirds of all smartwatches shipped in 2015 – February 5, 2016
Apple Watch kickstarted interest in wearable devices; sales of fitness trackers and VR headsets are set for rapid growth – February 2, 2016
Apple Watch beats Rolex in luxury brands ranking – January 29, 2016
Apple Watch revenues expected to be $8.4 billion for first year – January 26, 2016
Juniper: Apple Watch has already cornered the smartwatch market – January 12, 2016
Apple COO: ‘Apple Watch marks the end of single-function wrist devices’ – January 7, 2016
Fitbit either doesn’t understand Apple Watch or hopes consumers won’t; neither is good for the company – January 6, 2016
Fitbit exec calls Apple Watch a ‘toy,’ Fitbit shares crater more than 13% after unveiling Apple Watch Sport knockoff – January 5, 2016
It’s official: The Apple Watch is destroying the so-called competition – November 20, 2015
As Apple Watch sales ramp, Swiss watch makers suffer biggest slump in six years – November 19, 2015
Apple Watch models take top four spots on 10 most-wanted smartwatches list – November 18, 2015
Apple Watch is 2016’s hottest holiday gift – November 18, 2015
Apple has already sold more than $1.7 billion worth of Apple Watches – October 29, 2015
Strategy Analytics: Apple Watch sells 4.5 million units in Q315, takes 74% global smartwatch market share – October 28, 2015
Apple Watch users are abandoning traditional watches – September 15, 2015
Over 1 million Apple Watches already sold in China – September 3, 2015
Apple Watch already dominates smart-wearables market, says IDC – August 28, 2015
IDC estimates Apple sold 3.6 million Apple Watch units in Q2 – August 27, 2015
Best Buy CEO: Apple Watch demand is ‘so strong’ that we’re expanding sales to all 1,050 stores – August 25, 2015
Swiss watch exports decline most since 2009 – August 20, 2015
Apple Watch takes 88% of total smartwatch revenue – August 14, 2015
Apple Watch kills a entire industry in three months – August 12, 2015
U.S. wristwatch sales post biggest drop in seven years after Apple Watch debut – August 7, 2015
Apple Watch dominates smartwatches with 75% market share – July 28, 2015
Juniper Research: Apple is world’s #1 smartwatch maker – July 23, 2015
Canalys: Apple ships 4.2 million Apple Watches in Q2 to become world’s top wearables vendor – July 21, 2015
Apple Watch satisfaction is unprecedented at 97%; beats original iPhone and iPad – July 20, 2015
Non-techies love their Apple Watches even more than tech users – July 20, 2015
Apple Watch is Apple’s most successful product debut ever – June 1, 2015

33 Comments

    1. @Joe

      I agree Joe!

      Tim Cook’s legacy will be that he brought us the Apple Watch. If that alone doesn’t show his incompetence and the need for him to be fired then nothing does.

      There isn’t a single product in modern history that is more pointless.

      This product was designed with morons, imbeciles, idiots and douchebags in mind. It is a completely WORTHLESS product that they were forced to discount… basically because Apple is ashamed of it and wants it to go away, primarily because it sucks and it’s a terribly expensive JOKE!

      😒

      1. @Right On – Uh – basically your OPINION was designed with morons, imbeciles, idiots and douchebags in mind (such as yourself). I have found the AppleWatch to be incredibly helpful and absolutely LOVE it.
        If you don’t like it, don’t buy it. Simple (even for you to understand). It is NOT necessary to attack those (we number in the millions) who enjoy the AppleWatch.

  1. Actually MDN, they’re laughing today think that should have been the price from day one. The Apple Watch may not even correctly priced at $299 and, should probably be less.

      1. The sales must be drying up for Apple to have to cut the price.

        Same with the iPhone 5E — Apple got the performance right, but they knew then would have to discount it because they are reusing 3 year old hardware.

            1. They have too much money, and the worlds governments want to take it. Ergo, make less money.
              I should have been an economist.

            2. ????

              so whats wrong with ‘stimulating’ sales, wanting MORE sales (pleasing more lower income consumers ) does NOT mean sales were bad before.

              stats show Apple Watch beating all the other smart watches, wanting to FURTHER the lead is smart…

              by your logic an Olympic athlete after winning the Gold and then tries to BETTER his record proves that his previous win was a ‘failure’…
              huh?

            3. I think what’s happened is that they’ve underestimated the interest in buying multiple bands.

              Now that they see how many bands people are willing to buy, they’re seeing how they can make more money overall by selling the main device at a lower cost.

            4. you have an excellent point

              the profit margin for bands must be higher than the watch so it’s a win. As consumers are happier it’s a double win.

            1. The chassis is not the hardware, its the shell ! Its all new inside and that’s what counts. And there’s noting wrong with iPhone 5 screen, big deal. When I upgrade my PC with new motherboard and GPU etc, its an all new PC in an old chassis.

        1. Sales may have slowed. Maybe not. It’s a moot point. The OP I replied to stated that the price should have been lower at the introduction. Let’s say Apple sold 7 million watches in 2015 (a moderately conservative figure based on published estimates). Had the they sold them for $50 less from the start, that is $350,000,000 they would have left on the table. Do you know how many companies never have $350 million in annual sales? Most. From a business standpoint it’s just stupid to say that Apple priced them too high.

  2. Why is this a surprise. Best Buy and others have had this price for months now. Yesterday’s event was boring. Nothing really new. iPad Pro 9.7 is ok I guess but nothing new about anything. I don’t even get the whole concept on the need for the iPhone SE. Who is going to buy a 4″ screen iPhone for $399? Seems to me people would opt for the cheaper iPhone 5 or 5s or just jump to the iPhone 6.

    1. >Who is going to buy a 4″ screen iPhone for $399?

      That’s the unlocked, off-contract price. With a 2-year contract, it’s free.

      Who is going to buy it? It’ll likely be a mix of cheapskates, poor people, people who want a starter phone to give to their kids, and people with tiny baby hands like Donald Trump.

    2. >>>I don’t even get the whole concept on the need for the iPhone SE. Who is going to buy a 4″ screen iPhone for $399?

      I’m actually buying the 4″ screen 64GB $499 version, along with a ton of other MDN readers. I’ve been holding on to my 5S since launch day and finally have a new iPhone option in a size I want. I’d buy a 128GB model if they offered one.

      Oh, and I’ve been able to palm a basketball since 7th grade so it has nothing to do with my giant hands. I just want to be able to put it in my pocket and not have it constantly remind me that it’s in there.

    3. Most boring and worst presentation I’ve ever seen by Apple.

      The presenters were as boring and as lifeless as their delayed incremental hardware release and lower prices.

      Cook was only a shade more compelling addressing the FBI controversy, but lying through his teeth about customers in this ‘country’ as opposed to countries like China, him they’ve given the golden keys of full access. You know, because it’s those people’s choice to have a tyrannical government where they have no rights. Still, even that was half-assed. Maybe someone should have found a bigoted Christian heterosexual baker for him to get a bit more stoked up.

      Their OS software, once the most dependable aspect of their company is far less intuitive and far more buggy than anytime since the beginning. Yes, they have come some great new functions, but still fail to address functions never fully realized, and abandon functions on a whim.

      Their incremental hardware releases are becoming an even bigger joke.

      And service one is even more of a pale comparison to service in the 90s

      If I hadn’t invested so much money and resources into Apple and software, I’d be long gone.

    4. That’s hilarious. It wasn’t too long ago 4″ was the flagship, largest iPhone and it sold 10’s of millions. Just because larger iPhones are now available doesn’t mean everyone wants one!
      BTW I just sold my scuffed-up used unlocked iPhone 5 for $250 (64GB) and it sold very fast.
      And BTW about new iPad, speak for your self I’ve been wanting proper stereo speakers on iPad since day 1 and now we have it finally (quad even better). For me that’s the best upgrade, next being CPU and memory. I think the price hike and “pro” moniker are nonsense but to say nothing new is dead wrong.

  3. It’s really pretty simple…

    Apple maintains 30-35% margins on average on their products. Apple has production contracts with manufacturers. Here we are at the 1 year mark (from original production) and it’s time to renew those contracts. The manufactures have no ramp-up, nor do they have any tooling, training and other startup costs. Thus the costs are lower.

    We see this every year with iPhones and other devices.

    So Apple could take the lower costs and maintain the retail price increasing the margin. However, now that the Apple Watch has been out for almost a year, demand is, as to be expected, lower at the same price point.

    Lowering the retail price increases sales volume and since the cost is lower, the margin is maintained.

    Accessory sales and ecosystem boost benefits are helpful to be sure, but the bottom line is Apple is maintaining its target margin.

  4. it’s not that complicated folks, the price cut is in advance of a major apple watch release in Sept keeping the original higher pricing, and perhaps clear inventory. would be interested if the new one includes gps, wifi, curved glass, longer battery, slimmer case….

    1. This is exactly what I said…. They’re dropping the price to clear inventory for the new watch launch along side the new iPhone 7. To just immediately assume they’re making dumb moves or that it’s because they’re losing sales is to totally ignore what’s happening right around you. The Apple Watch is all over TV, from news to sitcoms. I see them everywhere.

      The release of the new 5se was smart. The research shows that way too many people still love that size. Honestly, to abandon them would be ignorant. Making it free on contract another smart move that should easily move the sales needle.

      Tim Cook gets a lot of grief for Apple Warch but honestly how many are really considering that that watch is the best selling smart watch in the market? How many realize that the watch is constantly being called the best smart watch in the market. Calling it useless is to look at it selfishly not considering the many people who love Apple.

      My opinion is that this year is going to really be exciting with a new Apple Watch and the iPhone 7. I’m really excited to see what Apple does with the Mac line now that Windows has the “My Mac can’t do that” campaign.

  5. There are many reasons to buy or not to buy Apple Watch. I heard good one today. ApplePay. In China practically every store and restaurant accepts ApplePay, so my neighbour said:”I bought Apple Watch mainly because I’m using ApplePay 4-10 times per day, sometimes multiple times in the same location with several different debit/credit cards. While I could do it with my iPhone 6S plus, I keep it in my handbag or shoulder bag. It’s just too big to handle with one hand”. She is a kindergarten assistant manager, who not only does shopping, but manages the 180 kids when they go in small groups to learn how to make pizza or visit the role play places etc.

    I also paid attention while in IKEA and Walmart, surprisingly many use Apple Watch to pay, then there are lot of people with iPhones doing the same.

    Then there is the grandpa in the downstairs park, he said it’s for catching the phone calls and for one medical app that is tracking his movements, pill taking, pee and poo times, etc.

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