Short shelf life and lack of reparability could spell trouble in the long run.

In the same week, I saw a question on Quora.com about the reasons behind the success of the Apple Watch despite a perceived lack of new features, and a story in the New York Times about smart watches: Apple keeps comparing sales of its wrist computers to “traditional watches“. Frédérique Constant, a brand with a vested interest in horological smartwatches only swears by the technology. But all in all, luxury brands and consumers seem to have become weary of associating slow fashion luxury with programmed obsolescence. I could write at length about why I don’t personnally see smart watches as a threat to traditional wristwear, but this question about the Apple Watch was a good opportunity to look into the reason behind its strength and speculate about its weaknesses.

Even if it offers features that competitors also have, the Apple Watch stands out because it has three things going for it: a design driven philosophy, a differentiating grade and markup equation, and the Apple ecosystem.

Design Driven Philosophy

Throughout the years, people have been comparing Apple products to mid-century German ones, mostly the creation of German industrial designer Dieter Rams, who summed up his philosophy in 10 Principles of “Good Design”.

One of the many product comparisons between Apple products and the work of German designer Dieter Rams. Photo montage by broken arm for Thumped.com.

And Dieter Rams would probably not have produced his body of work if it weren’t for the Bauhaus philosophy, which celebrated its 100 years this year. There is extensive material about Bauhaus on the Internet, but for a quick brush up I recommend page Bauhaus : Philosophy by Chris Snider.

Bauhaus has more to do with how one works, rather than what they produce, so it permeated numerous design philosophies, including the Apple design philosophy.

Image source: Bauhaus – 100 Years On | Frieze Symposium | SCP Life

Apple is one of the rare consumer electronics companies to treat industrial design and user experience as a core part of the business, not as an afterthought. So instead of focusing on what they put in the product, they focus on how they design them. In comparison, their competitors just treat each element as a utility from a checklist. They often build the electronics first, and then use industrial design to wrap it up. Apple uses iterations between engineering and design from day one, which means that one keeps challenging the other and vice versa.

Apple products usually use existing technology, but they often do it elegantly, which is what matters to their loyal customers, and is what earned them several spots at the MOMA.

Image source: A New Show at MOMA Explores the Ghosts in Our Machines

Grade and Markup Equation

Consumer electronics share a short shelf life with fast fashion. For fast fashion, it is obviously the “street” that created demand. So Winter and Summer sales help to make room for the new fashion.

In consumer electronics, the short shelf life is more or less driven by Moore’s Law, the fact that it is possible to shrink a device size in half every 2 years. So companies have an incentinve to sell devices within the first two years, knowing that they will be replaced by newer devices that pack twice the same computing power.

Consumer electronics must sell within weeks, or in worst cases in months. Because of this fash shelf life of consumer electronics, all parties involved earn on volumes. So in the case of the Apple Watch, the manufacturing cost accounts for MORE than ¼ of the retail price before sales tax. Geek.com did a cost breakdown estimate in 2015, and judging by the amount of CNC involved the case likely costs more than they Geek.com thought. For the sake of argument, let’s call this a LOW MARKUP pricing structure.

Traditional watches have a slower shelf life.

  • The hands of an analogue watch requires a certain amount of torque to be moved or held in position, which puts a physical constraint to how small the mechanism can be miniaturized.
  • Between the 1930’s and the 1960’s, watchmakers pioneered and perfected constructions and materials that allow to build watches that can withstand shocks encountered in a normal activity.

Because of the above, mainstream watches are subject to very little technolocical changes, and building them to endure daily life direftly makes them durable enough to last for decades.

Traditional watches can takes several months, if not years to sell. In consequence, the distribution is completely different than from consumer electronics: and all parties involved need a bigger cut of the margin to make up for the risk that they take by investing in a physical inventory. As a consequence, the manufacturing cost represents LESS than ¼ of the retail price. We can talk of a HIGH MARKUP pricing structure.

The Royal Oak model from Audemars Piguet, launched in 1972.

This is where the finishing grade of an Apple steel bracelet can stand
the comparison with the steel bracelet of an Audemars Piguet Royal Oak, a high end watch that retails upwards of $ 19,000 for its latest version (15500ST).

Where Apple differs from the traditional watch industry is by using a low markup business model to sell high grade wrist products, Apple uses expensive manufacturing processes such as CNC machining and computer controled polishing to produce their metalware.

Luxury smartwatches position themselves in the high grade + high markup slot, fashion/analogue smartwatches position themselves in the low grade + high markup slot, and Android (PC) watches position themselves in the low grade + low markup slot. As I have discussed in Why Labour Intensive Manufacturing is a Double Edged Sword for Smartwatches, the high grade + low markup slot presents some serious risks, especially if the material removal process or the material cost itself are not carefully controled. But by positioning itself there, Apple can offer a unique value proposition.

In comparison, competitors are stuck in a “utilities” mineframe. They only see components as another item on their check list, so in a typical “penny pinching” mindset they will try to source the cheapest possible components for the monw, while Apple goes the extra mile to put itself in the league of high end Swiss brands, when it comes to the finishing grade. Apple isn’t for example afraid of partnering with Hermès for leather straps.

That being said, I should add two remarks to keep things in perspective:

First, computing wristwear such as the Apple Watch is bound to have a shelf live of 2 years (remember Moore’s Law), while the very first Royal Oaks that Audemars Piguet produced in 1972 still runs flawlessly today, 47 years later.

Second, consumer electronics extensively resort to welding and glueing, which is great for shaving off ⅒ of millimetre, but makes dismantling and repair extremely difficult. In comparison, almost every watch, even the cheap plastic ones, are designed to be completely dismantled, repaired, cleaned up and put back together; while preserving their shock-resistance and water-resistance capability.

Apple Ecosystem

Another compelling argument in favour of Apple products is how seamlessly they work with each other.

Have you ever been browsing a page and wished that there was an easy way to transfer it on your computer’s bigger screen?

Have you ever tried to connect a new device to a WiFi network and wished that you could just copy the password from a device that you already connected?

Apple makes these small task possible. You can send a web page from your mobile Apple device to a computer, and vice versa. You can share the WiFi login credentials with another Apple device. Airdop allows you to easily share files, and so on…

Similary, the Apple Watch works in a similar way with the whole Apple ecosystem. I have been using Windows, Linux, Android and Blackberry 10 devices, and none of them ever allowed to perform those tasks natively.

In conclusion

As someone who works with design, wristwear and information technology, I attribute the success of the Apple Watch over competing products to the company’s focus on how it creates products, not so much what it creates. As long as Apple’s competitors continue to focus on what the product contains (utilities), even if it features new technology, they will always be one step behind Apple in terms of appeal.

However, Apple’s philosophy has relied heavily on the persona of Steve Jobs. After his death, it can be argued that the company no longer has a person to step in his shoes; especially after the resignation of Sir Jonathan Ives to launch his design firm.

It can also be argued that Apple sometimes tips over the breaking point of a design centered philosophy, when it allows form factors imperatives to drive decisions that impact design for manufacturing. Typically, Apple’s obsession with thinness makes them discard conventional mechanical design, which leads to constructions that are prone to issues.

Louis Rossmann of the Rossmann Repair Group is extremely vocal on Youtube about Apple’s construction and structural compromises for the sake of design, and of their questionable repair policy and rude dismissal of third party repairer. But “let he who is without sin cat the first stone”: the biggest watch companies have also been “cracking” down on third party repairers, as I covered in the Rising Demand for a Declining Watchmaking Trade, and they are driving many of them out of business in order to better monetize the watch repair business.

Categories: SmartWatches

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