The $10,000 Apple Watch Strategy Takes Shape

By Markets Fool.com


Source: Apple.

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April will be one of the most pivotal months in recent memory for tech giant Apple(NASDAQ: AAPL). The company's second-quarter earnings report is due on April 27. More critically,Apple will launch its first new product since 2010 -- the much-anticipated Apple Watch.

While it has generated incredible interest since being unveiled last fall, the Apple Watch has proven a polarizing product among company observers. Setting aside some of the more intriguing economic questionsabout the Watch, investors should pay attention to several new and noteworthy details about Apple's smartwatch distribution strategy.

Apple Watch's highbrow hubs
Apple will begin holding appointments to view, interact with, and pre-order the Apple Watch on Friday, April 10. It has been rumored that Apple Stores themselves will get some kind of revamp ahead of the Watch's coming trial period, although it remains to be seen exactly what that means in practical terms.

Apple is also said to be adding an interesting new element to its Watch distribution system. According to a number of reports, the tech giant plans to open several pop-up shops inside a number of prominent high-fashion department stores worldwide. The ultimate number of locations is still unclear, but Selfridges in London, Galeries Lafayette in Paris, and Isetan in Tokyo have all been cited as spots for these upscale retail shops.


Source: Selfridges.

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The reports indicate company sales associates will staff these shops, while Apple's Geniuses apparently will not be on premises to provide technical support. It is believed Apple will have all three "tiers" of its Watch available for trial and/or sales at these locales, which is noteworthy as Apple CEO Tim Cook has publicly stated that the ultra-expensive Apple Watch Edition will be available in extremely limited quantities during the device's launch.

So why does all this matter?

It's all about the brand
To me, a few parallels between the Apple Watch Edition, which starts at $10,000, and these high-end pop-ups are worth considering, especially as I believe both are intended to serve the same broader purpose for Apple as a whole.

As I've discussed in a prior article, the Apple Watch Edition's initial unit sales are almost immaterial. Under most reasonable assumptions, the Apple Watch Edition is unlikely to produce more than $2 billion in sales in its first year on the market; that is a meaningful sum, but it would not make or break Apple's fiscal year. Similarly, these Apple pop-up locations are unlikely to make a material financial impact on the company's overall performance. So what does Apple gain by pursuing either strategy?

Both signal to consumers that the Watch, and Apple's products as a whole, are more than just consumer electronics. Apple here is very explicitly positioning its goods as more than mere hardware and software -- these are devices that enhance one's life in some abstract but beneficial way. Apple has always been able to shape the way it wants to be perceived by consumers, and I believe we're seeing the same tactic with both the Apple Watch Edition and Apple's new luxury retail locations.

Around the time of the company's founding, Steve Jobs wrote a brief paper called the Apple Marketing Philosophy. It enumerated three core values Apple would pursue in selling its goods, one of which is particularly important in this discussion. As Walter Isaacson detailed in his authorized biography of Jobs, one value was "impute." According to Jobs, "people form an opinion about a company or product based on the signals that it conveys. ... We may have the best product, the highest quality, the most useful software etc.; if we present them in a slipshod manner, they will be perceived as slipshod; if we present them in a creative, professional manner, we will impute the desired qualities."

Viewed this way, both the $10,000 or greater Apple Watch Edition and Apple's luxurious pop-up stores are attempts to signal that the company's products remain a cut above the competition's. With the Apple Watch's launch nearly up on us, we'll soon see whether either of these tactics truly resonates with consumers.

The article The $10,000 Apple Watch Strategy Takes Shape originally appeared on Fool.com.

Andrew Tonner owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.