Like Greenman would say “Either you buy Apple products or don’t buy it but don’t bitch about it…”
I think the difference is quite large. It’s a barrier to entry, and that’s why I question whether Apple is a “luxury” brand. There are many premium products in the market that are not considered “luxury” goods. For example, in my town there’s a pizza place that uses premium ingredients and sells at a premium. But it’s not a “luxury” pizza. It’s a “premium” pizza.
Foxconn produces products for Apple that are premium in a similar way. Only instead of premium ingredients, they tend to use good manufacturing techniques. The materials in an iPhone are not superior to premium Samsung, LG, or HTC phones. Apple didn’t use sapphire crystal for the display because it was too expensive this time around. That doesn’t seem like the approach one would use with a “luxury” product.
The barrier component is important because we’re debating how sustainable Apple’s margins are when competitors are providing a similar experience and product at much lower margins. What’s the difference between Coach and Louis Vuitton? My wife owns both and I can tell you that there’s not much difference in product quality. The key difference is that Louis Vuitton displays a sense of wealth that Coach does not. Women want Louis Vuitton *because* it’s more expensive! They don’t necessarily want it because it’s superior. That’s a significant barrier because other brands would have to earn the luxury perception and that’s very difficult, costly, and time-consuming.
Do people like Apple *because* it’s more expensive? I question this because most of an iPhone’s cost is hidden to the consumer through financing bundled with cell/data plans. If that financing were not extended to current Apple customers would they be willing (or in many cases even able) to write a check for $1,000 when they could pick up a comparable Android-based device at half the cost or less? I would expect not.
Apple’s brand is a competitive advantage. But I don’t necessarily think it’s a sustainable one. In the short-term, yes. Five years from now? I doubt it.
Absolutely nothing. Neither as a stock nor a product.
But let’s face it–most of the people wearing Justin boots are blue-collar, redneck, “Praise the Lord and pass the ammunition” types. (Kinda like you might see in West Texas.) And those people will continue to buy them forever and ever, amen. Sounds like a good stock to me.
i agree with IB. luxury doesn’t mean it has a 30% premium. luxury means a 200% to 1000% premium. true luxury and high end products act differently. if something better or cooler comes out to replace a slew of products, the true luxury products will be much more sticky than high end products. high margins don’t determine whether something is luxury or not. you can be a luxury and have no margins.
Well, there is no doubt that people perceive Apple as a premium brand. The premium pricing is only lessened, not eliminated, by carrier subsidies - you still must pay money for iPhones. Also, don’t forget that Apple gives you other price signals through products that are not subsidized by data companies, like Macbook Air and others.
But I do not think price is the only thing that establishes the premium image of Apple. Shiny hardware, marketing, Apple store design, cool Steve Jobs, all help as well.
Although some Android phones are priced as expensive or more expensive than iPhone, the fact that they share operating systems with lesser phones cheapens Andoid phones in the eyes of consumers. While this factor exists, Apple will always have a degree of snob appeal over Android phones.
In general, though, electronics is weird because luxury or premium quality is not always brand specifiv. LG is not a luxury company, for instance, but an 80" OLED TV will most likely be considered a luxury product. Other electronic brands - Bose? can produce any kind of speaker and people will assume it’s expensive. So it depends on the product.
I think it is a bit petty to argue about the definition of luxury or the difference between luxury and premium. Just be like bchad and understand what the guy is saying.
I agree that the market leader in electronics can change rapidly, as this market is more driven by innovation than brand image. Contrast this to say, Swiss watches. Rolex can make the same watch for 20 years and people don’t care. Apple clearly cares about users running away and takes great steps to lock you into the ecosystem. This reduces but does not eliminate the risk.
Reduction in Apple stock price does not need to be associated with a loss of premium image. Apple could just sell fewer phones.
SRK - those abs. Who will pay us to bend over for rich movie stars when rahul gives it for free?
Their level of operating leverage, however, could reduce those margins substantially if sales were to decline.
Another thing I like is the Beats acquisition - they also have a great brand that is tremendously popular, everytime you see a pro athlete wearing headphones, chances are they are Beats. We all know LeBron has been a big promoter, but it’s not just a US thing either:
S&P is up 200% since March 2009, not 115%. It has tripled since its low of 666 on March 9th, 2009.
Please do me a favor and never ever talk about the automotive industry again like you had clue, because you don’t. It seems you didn’t get my last remark on that matter. Sure Lexus is a premium brand, but it couldn’t exist with Toyota’s behemoth infrastructure (the same holds for Nissan-Infinity, Honda-Acura). Porsche is a corporate mess with the founding family nearly wrecking the company when they tried a takeover of VW which quickly turned around on them. Today Porsche is on VW’s leash and the only reason they still exist is that the brand name carries some weight for corporate pencil-d***s. It would have long been replaced by Audi (which belongs to VW in case you didn’t know). Mercedes (Daimler) on the other hand struggled very much in the last decade in its core markets because of their weak brand image (retiree-car) and the only thing keeping them afloat were their stable business segments - semi-trucks and buses. BMW is kind of an outlier, as they have never branched out into lower segments (except maybe for their engagement with Mini), but their performance wasn’t so rosy either. BMW is one of the more cyclical car manufaturers. You could argue that maybe Lamborghini (read VW) and Ferrari (read Fiat) are doing fine, but actually they don’t. Lamborghini did start to sell cheesy perfumes and fashion to non-Lamborghini-owners for a reason. Profitable luxury-only brands are very very scarce and the few examples like LVMH have their own unique stories that don’t convince me of a golden future.
Long story short, please go out there and buy yourself a Koenigsegg to match your attitude towards Apple.
Who would’ve thought the dude with a name like “I am the highway” is a car expert!
Is it time we admit that the Apple BRAND is better than the Apple PRODUCT?
I don’t think he knows what he is talking about. WIth many of these luxury auto brands, they simply do not have the scale and marketshare to survive on their own, and they are truly niche products. Ferrari sells 7,000 cars a year, and will always sell 7,000 cars a year. Nor is it true that being inside a larger corporation has protected them all that much. Ferrari was mishandled by FIAT for many years until LCDM turned them around. However, over the last few years, the same luxury marques have become major profit engines for their holdco. Audi and Porsche make the majority of profit for VW group, while the rest of their cars are shite and getting worse, and in fact P are expanding their market , and still selling at a premium over Audi. Ferrari has become the crown jewel for FIAT, and they are now expanding them into a larger luxury entity that will share parts with Maserati and AR.
But all that is beside the point, and very much a straw man. Apple has far stronger marketshare and better margins than any of these auto brands, and is simply a better business thanks to its ecoystem lock-in, and weak competition. Porsche, which has a very high operating margin of 18% is dwarfed by Apple’s OM of around 28-30%, and Apple has significantly better scale.
You can bleat all you want, but in all consumer products, there is always a space for a high end good for people who care about buying quality products and can afford them. Jobs, Cook, and Ive get this, and they’ve done quite well at it.
Word, Palantir.
Know your role and shut your mouth, jabroni!!!
Or we’ll take that iPhone of yours, turn that sumbitch sideways, and shove it straight up your candy ass!!!
I call BS on that. It is no problem for me to say Apple products are superior in design and wholesomeness of ecosytem to most competitors out there. However, a good product does not make a good company and does not make a good stock. Video2000 was superior in many ways to VHS, but it nevertheless failed. Today, my guess is that 50% of Apple’s stock price is hopes and dreams, hopes and dreams it continuosly fails to deliver. In this case the quality of their products and services is meaningless, because investors already priced in decades of innovative products to come, none of which appear on the visible horizon. When the time comes and Apple mean-reverts there will be a lot of moaning among investors, but the company itself will continue to deliver their well-designed products. The discussion in this thread is way to centered on products, the stock is the only thing that interests me.
Palantir, why the hell is there a U2 album on my iPad?? I didn’t ask for this shit
Apple sells 10 million new iPhone 6 devices on first weekend
Why do you own an iPad?
Why is there this free toy in my happy meal?!?! I could just throw it away but that’s too much work! F*** McDonalds!