Iphone 6

Water Cooler
#121

Seriously? Apple products are high end goods, and always priced about 40% higher than their competition, and yet still affordable enough for many people.

“There’s always a large junk part of the market,” Cook told Bloomberg Businessweek in a wide-ranging interview on Thursday. “We’re not in the junk business.”

http://www.theregister.co.uk/Print/2013/09/19/apple_ceo_cook_were_not_in_the_junk_business/

What’s BMW’s market share of the auto market? Does anyone know? Well, it’s less than 2%, but no one cares. Why? Because either you drive a BMW or you stare at the new one driving by. If we do our job, we’ll make products that people lust after, and no one will care about our market share.

http://blog.adamnash.com/2011/10/10/steve-jobs-bmw-ebay/

#122

again, you can’t compare a $1000 phone (2.5% of average annual salary) to an $80,000 car (200% of average annual salary). clearly, just by walking down the street, there are many people at or below the poverty line who own iProducts, and as long as you make over $20,000/yr, you have a chance at owning an iPhone. if only people who could afford BMWs bought iPhones, iPhone sales would be 2% of what they are currently. i know people on welfare who own iPhones.

#123

Apple produces “high end” goods, in that their smartphone quality is on par with other high-end smartphones. But is it a “luxury” good? A luxury good is one that, by its very nature, targets a small, high-income segment. Apple in no way does this. In fact, virtually all of their phone sales in the US are *financed* through AT&T/Verizon 2-year plans. This enables them to target the lower end of the market. How many “broke” college students do you see with iPhone? A lot. How many do you see driving a Porsche or wearing a Rolex? Not many.

#124

So even poor people are willing to pay the Apple premium huh? That is the point, as I stated, these are affordable luxuries. Apple products are priced at a significant premium to competitors, but still within reach of regular people. That’s why they are generating so much profit.

#125

Within the smartphone market, there is no question that Apple is the luxury brand. Secondly, it doesn’t matter that their phones are sold on contract, luxury car manufacturers do even better in lease markets, same thing with Apple. In developing countries without subsidies they don’t do as well, but even that may start changing.

#126

I love it when people say “only dumbasses buy Apple products, so they must be a bad stock”.

Only poor white trash folks live in trailers, yet Warren Buffett thought Clayton Homes was a cash generator, so he bought it. He also bought Fruit of the Loom, Dairy Queen, and Justin Boots. None of these are particularly known for having the smartest or richest customers.

#127

and yes, i am Scoble. and yes, Glass or something very similar has a good chance of impaling Apple b/c how dumb is it to live in a society where everyone has their head down and is looking at a something in their palm? GOOG will soon own the mobile ecosystem, the ecosystem running self-driving cars, and the wearables ecosystem. is there any room for anyone else?

#128

I’ve seen plenty of poor people with iPhones. The approximately $300 premium they charge over comparable competing smartphones mostly gets finances at about 10-12%/year through cellular service plans. This difference works out to less than $20/month. This is actually part of Apple’s strategy.

I don’t think you can make a reasonable argument that Apple is a “luxury” brand. You can argue that they make “premium” products, but since Apple products are accessible by the vast majority of Americans (and most other Westerners), you would be hard-pressed to argue that their brand is a “luxury” item.

#129

hahahahahahahaha

#130

what’s the point of calling something luxury if it doesn’t provide it with any useful meaning. Hubba Bubba is a luxury brand in the bubble gum market. Does that mean anything to you? No. Any kid with sixty cents can buy it. There’s no point calling it luxury if it doesn’t come with a barrier to entry. so if there is no barrier to entry in buying an Apple product as it is not a true luxury product then having high margins is a bad thing b/c luxury just mean bloody expensive. please see COH for what happens when a luxury brands goes ghetto.

#131

Good, now that you agree that Apple is on the premium end of the smartphone market, it is just a matter of semantics. As I stated, these are affordable luxuries, Apple is not trying to be Virtu, they occupy the high end of the market, but are still accessible.

In either case, you’re not making much of a bear case by telling me that people from all walks of life are willing to pay the premium for Apple.

#132

If it has no useful meaning, then why do people pay more for their products? Why do people line up days in advance before the product is even announced? Why does it have such a huge, loyal, and passionate fanbase?

#133

It’s not a matter of semantics at all. Apple’s distribution strategy specifically targets the low end of the market because they conceal their prices behind two-year financing plans. A “luxury” brand is one that is not just expensive, but that stands as a symbol that socioeconomically separates its owners from others. Apple does not do this, and this isn’t part of its strategy.

The question becomes, if Apple isn’t a luxury brand, what sustains its high margins? I would argue that it mostly has to do with switching costs at this point. While Apple hasn’t been too terribly technologically innovative over the past couple of years, it has worked hard to increase switching costs by adding additional services tied to the iPhone. I think that’s the whole purposes behind the watch as well.

#134

No, Apple doesn’t target the low end. The subsidy model hides the upfront cost, but everybody buys through this model. Apple is a luxury brand and its margins are sustained by the best design, ecosystem, hardware and software integration, which yields the best overall experience.

#135

Apple has been regarded as a high end brand for how long? 7-8 years?

How many years have Porsche, Rolex, Ferrari, Lambroghini been regarded as luxury brands? basically forever.

to assume that Apple has as much staying power as any of these brands is just stupid, especially in a market that has 18 month cycles (and 5-10 year supercycles). do cars and watches work on 18 month cycles? when was the last time a car came out with something that was brainnumbingly amazing and changed your life forever? like 80 years ago?

Apple’s margins are at risk b/c if they don’t happen to come up with the next cool thing, which it seems they are far from doing, then they will no longer be cool and will be a high end brand in a slowing or dying market segment. Porsche isn’t at risk of a new mode of transportation coming and taking all of its business away. Apple is and always will be. its the nature of the business.

#136

You’re ridiculous.

#137

you guys are bickering over the smartphone market and if Apple will continue to be able to charge their premium. they will probably be able to charge the majority of its premium until a new market creates competition to that market. i truly don’t expect some random new “Oracle-Phone” to unseat the iPhone.

the real argument is when does the “smartphone-killer” arrive b/c this is what will kill Apple’s margins, its growth prospects and its valuation. the “smartphone-killer” is all that matters. when GOOG owns 80-90% of the mobile phone ecosystem, 100% of the self-driving car ecosystem and has a product that can start chipping away at smartphone demand, Apple is screwed. Apple’s only chance is to somehow create a wearable that’s better but it doesn’t seem like they’re even focusing on this market seriously.

you can argue over small dollar differences over the next 3-7 years, which has a minimal impact on valuation or you can look at Apple’s earnings over 10-20 years. earnings don’t really matter when making big calls on stocks. changes in direction are critically important, especially for market leaders.

#138

Here’s a fun fact. The 41% of iPhone users live in households earning more than $100,000/year vs. 25% of Android users. However, Android has a market share of 61.9% and iOS has a market share of 32.5%. Multiplying these out, more households earning over $100,000 have Android phones than iOS phones.

But Apple is a “luxury” brand.

#139

What’s wrong with Justin Boots?

#140

I’m not sure that there’s a huge difference between a premium product and a luxury product.

My stay at a luxury hotel includes luxury towels that genuinely feel more luxurious. Those towels probably cost $30 instead of $10-15, but they aren’t categorizable as luxury because someone from the ghetto who really wanted one probably could save up and buy one.

From the manufacturer’s point of view, though, they may well be able to command a nice margin, so from an analysis point of view, I’m not sure that luxury vs. premium matters that much. The question is what are the barriers to entry that prevent a competitor from issuing the same product at a discount.

For Apple, the key is innovation, both within product segments and in creating new product segments. Apple does have a brand identification that has a patina of luxury - after all, this is why the movie stars seem to have iPhones (as mentioned earlier in the thread).

To me, the biggest threat to Apple is when Apple starts looking like an old fogie’s brand and the youngvolk want to use something else to prove that they are different and not stodgy. But so far, I don’t see this happening, outside of a particular segment of the geeksphere. Go to college campuses, and it seems to be Apple as far as the eye can see. And not using Apple seems to mean that one isn’t rich enough to afford the shiny new apple products…

This looks like a luxury brand to me, although if you want to say it’s “just premium,” I won’t argue with you. But the luxury vs premium brand - at least in the computer industry - seems to be a distinction without much difference. I don’t see many people running out to buy sapphire encrusted keyboards just yet.

And now Apple is opening a new market segment with its watches. I must admit, I was unimpressed when the iPod 1 came out, but I have to agree that it changed the market. The iPhone was more obviously interesting when it was introduced, and changed the way that market worked. The iPad was less interesting than the iPhone, but I eventually saw the logic of using something like it.

As for the Apple watch, I’m not rushing out to drop $350 on it, but I’ve warmed up enough to questionable products in the past that I’m not ruling out that it could completely change how the watch category operates. I don’t think the market for Rolexes is theatened, but things like Fitbit definitely are.