What about margins on these products? I think I’ll save that analysis for another posting, but my belief is that the Apple Watch product line will become Apple’s most profitable product line ever, with gross margins exceeding 60 percent. Why? Because the core electronics modules in the expensive models are the same ones used in the Sport models, and they just don’t cost that much. And while adding Gold cases and designer bands add cost to the bill of materials, the costs are small compared to the price premiums paid for these products. Unlike in the consumer electronics business, I see no pressure for prices to fall and if anything manufacturing costs will, resulting in a very profitable business.
Archive for April 2015
Ultimately what I am convinced of is the Apple Watch represents a completely new computer interaction model. A PC is for when we have a few hours. Our smartphones is for when we have a few minutes. Our smartwatch is for when we have a few seconds. Each device, and the software and experience built for it, should help us maximize those hours, minutes, and seconds.
There were 21 Apple Watch reviews published, but the 4 reviews that were more critical of the device got the most attention, leaving the 14 glowing reviews behind. Meanwhile, most of the important features of the Watch such as watch bands and durability were either not included or buried within lots of other text. Simply put: product reviews are broken. There needs to be a better way to review products.
That’s the difference between good products and great ones—not what they do but what they have the potential to do. When Apple released the iPod it was famously criticized, but before long it had transformed the way we listen to music, all but eliminating physical media and paving the way for a virtually unlimited online storage locker that lets us carry tens of thousands of songs with us wherever we go.