New York City Jeweler TraxNYC knows how to market expensive watches with a lot of bling. This year, the jeweler partnered with NBC’s America’s Got Talent. The show’s host, Nick Cannon wore the jeweler’s $180 K Diamond Rolex Sky Dweller on-air and it sparkled brightly during the show’s finale at Radio City Music Hall in Manhattan.
“Nothing speaks more about a man’s style than his watch,” says TraxNYC owner, Maksud Agadjani, who carries a stunning selection of diamond-encrusted watches and wears a Rolex himself. He plans to carry Apple’s Watch when it comes out in 2015. Apple will sell the product retail, not wholesale, so Agadjani may open up the Watch and install a diamond bevel for a tidy mark up.
Industry insiders say the case of Apple’s Watch could spring open, and will not be hermetically sealed like the iPhone. The Watch holds a System on a Platform, the powerful integrated circuit that can power a multipurpose computer the size of thumbnail. The Watch’s semiconductor package may be encased in ceramics so users can remove the entire electronics package and replace it when the Apple upgrades its processors to a new generation. Wall Street Semiconductor Analyst Richard Whittington says a replaceable IC package would give the Watch a longer lifespan, critical to buyers of watches over $5,000.
The Watch Line
Apple said it plans three levels of watches: Sport is the entry level, Watch is the middle tier and Edition is the high end. Sport could retail for $350 as Apple announced earlier this month. Though Apple has not given prices for the other tiers, retailers believe the price for Watch could be around $1000 and the price for Edition could be $5,000 – $10,000.
“At $350, the Apple Sport could be a huge phenomenon. I can imagine people lining up around the block when it’s released, like they did for the iPhone. People get excited about brand new experiences. They loved the novelty of the iPhone’s magical touch screen, endlessly sliding pictures around. They’ll react the same way to novel functions of the Watch. It taps you for appointments, counts calories and checks glucose levels in your blood,” he said. Maybe someday they’ll get tired of the tapping, tapping, tapping but at first, they’ll think it’s great,” he said.
The mid-tier of Apple’s line, also called Watch, could compete with the mid- to high-end mechanical watches like Gucci. Watchmakers for the Italian fashion house buy components wholesale for about $65 then assemble them in gold or stainless steel cases with a sticker price $1200. Gucci watches leverage the luxury brand’s name. Apple’s mid-range Watch may also compete with Movado, Omega and hundreds of manufacturers sourcing components from Asia.
The top of Apple’s line, the 18 Karat-gold Edition could retail for $5,000 to $10,000 and compete with the two-tone Rolex made of stainless steel and 18 Karat gold. Other brands in the high tier include Cartier, Piaget and Tag Heurer.
No Contest With Rolex
Apple Watch can’t touch the highest tier of Rolex watches. The heavy solid-gold Rolex timepieces carry retail prices starting at $35,000. The gold Rolex watch has much more and higher caliber gold than what’s planned for the Edition, so the raw materials are orders of magnitude more costly.
Though Jony Ive, Senior VP of Design at Apple implied Apple could take on Rolex, retailers are not convinced it’s in the cards. Rolex has precision components and exacting manufacturing honed over a hundred years. The components are expensive and quality is second to none, says Agadjani. Apple is a relative newcomer with no direct experience. No contest.
As for the rumors that Apple tried to partner with Rolex and the Swiss manufacturer turned them down, Agadjani says, “Of course a joint venture with Rolex would never happen. Rolex partners with Kings, Presidents and dignitaries. Maybe they would do a one-off specialty deal with a high profile individual, someone with a sterling reputation like the late Paul Newman, but not with Apple. Rolex wants to maintain complete control and does not want to dilute the brand with high-volume production. It prefers the realm of the 0.1%, not the mass market, even if it’s the upper tier of the mass market.”
Watch Customers
Most consumers have one primary watch that’s expensive and they wear everyday. Then, they have above five fashion watches for different occasions. Apple needs to address demand in the mass market at attainable price points. The Watch will probably be a secondary watch for buyers with health apps that are cool and fun.
Apple is going to make a big splash with Watch, welcomed by watch retailers and manufacturers. Maybe Apple can accelerate industry growth, stuck in the single digits. Celebrities with flashing lights create excitement. But is Watch a fad or does it have staying power. Can Apple outlive traditional Swiss watchmakers who have been working their trade for hundreds of years? Probably not, but in the short term everyone will enjoy the novelty.
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