This is the worlds leading source of financial content on the web, ranging from market news to retirement strategies, investing education to insights from advisors.
Forex Forever!

The Battle Between Apple Watch & Luxury Watches

Author: Matthew Smith

The luxury watch industry was threatened in the 1970's when a wave of cheap and accurate quartz watches from Asia hit the market. However, the industry bounced back and has since enjoyed up-trending sales year after year on the back of rising interest in luxury items. Forty years later, and luxury watches are again facing a major challenge as Apple Inc (NASDAQ: AAPL) debuts the Apple Watch. How will the Apple Watch affect the luxury watch industry? (Related reading For Consumer Discretionary Investors, Luxury Is Where It's At)

All About the Apple Watch

Apple offers its watch in three classes: Apple Watch Sport, Apple Watch, and Apple Watch Edition, with each class containing many models. The first class of watch, the Apple Watch Sport, is the least expensive. It offers 10 models ranging from $349 to $399. The second class is the Apple Watch. It offers 20 models starting from $549 and moving up to $1,099. In the latest World Watch Report, the Digital Luxury Group thinks that 80 percent of Apple Watch sales will come from these first two classes of Apple watches, with most sales priced below $700. If true, this would place 80 percent of Apple Watch sales well below the luxury watch entry point. (Related reading Who Are The Brains Behind Apple?)

However, Apple enters as a direct competitor to luxury watches with its third class of watch, the Watch Edition which is a jaw-dropping, beautiful 18-karat gold as described by Tim Cook, CEO of Apple. Apple's Watch Edition comes in six different variants with an 18-karat gold case, sapphire crystal protected display and is loaded with features like digital crown, retina display with force touch, heart rate sensor, accelerometer and gyroscope, ambient light sensor, microphone and speaker, and water resistance. Watch Edition by Apple could be the biggest disruption that the luxury watch industry has faced in years.

But How Much Does it Cost?

Prices for the Watch Edition start at $10,000 and rise to $17,000. Those are certainly luxury prices, but can the Apple Watch Edition truly compete with luxury brands like Rolex, Omega, RADO, Dior, Longines, or Cartier? According to a survey by Albatross Global Solutions, Worldwide, only 27 percent of our luxury consumers preferred the Apple Watch to a luxury watch, and only 15 percent considered the Apple Watch as a potential substitute for a luxury watch—something legitimately competing for the same space on their wrist.

Consumers of these high-end watches are looking for something beyond simple time telling (or even a heart rate sensor and gyroscope). They are searching for the status and statement attached to wearing a luxury watch. In addition, consumers cite timelessness, design, and craftsmanship. Luxury watch buyers also consider their watches collectible.

How many current luxury watch consumers will make a definitive switch to the Apple Watch? Yes, there will be a percentage, but there is a higher chance that those people keep both rather than banishing one for the other. So, for these consumers, it may be an Apple Watch Edition to work and another luxury brand for social events. (Related reading, see: What Makes Apple (AAPL) the Most Valuable Company?)

Instead, of stealing from the luxury watch market, the Apple Watch may simply add to it. Apple Watch buyers may be people who have never bothered to wear a wrist watch, especially the younger generations. The Apple Watch also appeals to a slightly older demographic who gave up wearing a watch when they got their first cell phone. Among watch wearers, the Apple Watch could also appeal to those who love technical gadgets and being the first to own a new technology. Apple loyalists will be another reliable consumer.

The Bottom Line

It will be interesting to see how consumers respond to the Apple Watch's combination of technology, utility, and luxury. These spaces have different parameters and Apple, especially with its Watch Edition series, tries to combine them. While the luxury watch industry is nervous, it is also possible that Apple finds a place in the industry which is complementary rather than competitive.

last five articles

#283 5 Ways To Protect And Grow Your Retirement: Whether You’re 45 Or 75 Or Somewhere In Between

Author: Matthew Harris

We just recently Money Weekly's first birthday, and this milestone also got me thinking… If I had a magic wand and could instantly pass along a bundle of critical information to my peers, what would that message include? Since I don't have a magic wand, I had to distill a bit of my practical wi... see more

#29 What You Need To Know About COBRA Health Insurance

Author: Christopher Smith

If you lose your employee health insurance benefits because you are laid off or have your hours cut and you work for a company with 20 or more employees, your employer should notify you about your Consolidated Omnibus Budget Reconciliation Act (COBRA) health insurance eligibility. But what is COB... see more

#836 Affordable Health Insurance For College Students

Author: Matthew Taylor

The college years can be a stressful time for any student, but paying massive healthcare bills is one worry students shouldn't have on their plate. With the Affordable Care Act, students have more options than ever when it comes to finding affordable insurance.Here are some paths to consid... see more

#346 Analysis: Should You Get A Gold IRA?

Author: Jacob Davis

Imagine turning your retirement nest egg to gold. By adding a gold IRA to their investment portfolio, that's what many people are doing, literally. But is this the right move for you?A gold IRA is a type of IRA that allows the investor to own physical gold, silver, platinum and palladium i... see more

#1504 Goldman Sachs’s Entry Into Online Lending

Author: Jacob Williams

Financial technology's emergence has become a disruptive force in an expanding number of financial services. Fundamental to financial technology is the link between technological advancements and financial services. As a result the customer benefits from greater transparency and accessibility to ... see more