The western world doesn’t typically think of Apple as a “luxury” brand. Though its products do cost hundreds of dollars, with the exception of iPhones that come with contracts, Apple doesn’t necessarily hold the same position as, say, Louis Vuitton or Jaguar in the minds of those fixated on pricey luxury items.
However, due to demand and price accessibility for consumers in other countries, Apple has emerged as a global luxury brand right up there with high-end fashion lines and sports cars. So why and how is it that the global perception of Apple has become that of a luxury brand, when it’s common in America to see an iPhone or iPad on every corner?
Apple Aims for Its Products and Stores to Exude Luxuriousness
Apple has made two hires in the past year that would suggest a move toward a more stylish, fashion-conscious sense of self. The first luxury-related hire was last year’s bringing on of Paul Devene, head designer at Yves St. Laurent, for what the company called “special projects.” The second, and perhaps more important, was the hiring of Angela Arendts, former CEO of fellow global luxury brand Burberry, to be the company’s senior vice president of online and retail stores.
Now, why these two hires in particular? These were bold moves by Apple to find unique ways to make aesthetically pleasing products and to create a luxurious environment in its stores and web portals, mainly by refurbishing them to become more fashionable and stylish. Arendts had done the same to influence Burberry’s turnaround, and Devene was a great match for stylizing Apple’s upcoming line of smartwatches to look sleek and more expensive so that they stand out in the emerging sea of wearable technology.
In both instances, Apple aims to coax a new image out of intelligent, chic designs to support its position as a luxury brand the world over. This new look would add value to the devices’ tech-driven features and contribute to an overall luxury-appropriate price.
Even The “Cheap” iPhone 5C Is A Global Luxury
Without a contract, the iPhone 5C, touted as a less expensive model than the iPhone 5S and targeted at developing nations, costs about $549 in the U.S.—no small fee even in a country as economically developed as America. This high number has varying comparable prices in developing nations such as China and India.
In China, this number rises to about $730, or 4488 yuan, which is about an average month’s salary in the country. In India, $549 would equal 35,048 rupees, or, again, about an average month’s salary. In both of these cases, this price point puts even the iPhone 5C out of financial range for most of the two countries’ populations.
There is one caveat to this initial price point: it is off-contract, which means that purchasing an iPhone 5C with a contract could bring the smartphone’s price down to just $99 in the U.S. In fact, in India, both the iPhone 5S and iPhone 5C are available for free with a two-year contract from RCom. China has the same deal, where China Unicom (No. 3 Chinese smartphone carrier) offers eight plans with the iPhone 5C for free, and China Telecom (No. 2 Chinese smartphone carrier) offers three different plans where the device is free—as long as buyers are willing to be locked into a long and relatively expensive contract.
The potentially expensive contracts could be the downside of an iPhone 5C purchase in these two countries, but they could be enough to attract more middle-class buyers without sacrificing the company’s luxury status too much.
Apple Makes a Move With China Mobile Deal
Prior to the recently signed deal with China Mobile, which has about 760 million customers and is the country’s No. 1 smartphone carrier, Apple only had four stores in 400 million square miles of territory. With the country’s supply so low and its costs remaining fairly high, Apple quickly found it had become a luxury brand in China.
Now that its products are available at China Mobile’s expansive network of stores, Apple hopes to rake in profits by encouraging more upper and middle-class consumers to embrace the company’s latest iPhones, which began to be sold at China Mobile stores officially on Jan. 17th. Thus far, the deal has not been as “watershed” a moment as Apple CEO Tim Cook predicted, though it has made China a valuable extension of the Apple ecosystem.
With 760 million potential customers, Apple stands to make tens of millions of sales in the country, but it must do so carefully to preserve its title as a luxury brand. If Apple products are sold too widespread, they might experience the same situation the company has in the U.S., wherein hundreds of millions of iPhones have already been sold and the product has lost much of its luster.
Apple’s Different Approach to India
In India, the launch of the iPhone 5S and 5C does not appear to have had the same effect as it did in the U.S., or even China. The iPhone 5S is too pricey, and the iPhone 5C too blah, so Apple instead has chosen to rerelease the iPhone 4 to the Indian market.
While the specs are far below the latest editions of the smartphone, the iPhone 4 may see a resurgence from its heyday in 2010, though its price point still remains high at 22,900 rupees or about $370. Instead of providing an updated but reasonably priced phone in the country of more than a billion, Apple instead chose to keep the price at a point of luxury and inaccessibility for many Indian consumers.
Headed in a different direction was Apple’s decision to drastically slash the cost of the 2012 iPad mini in the Indian market, taking it down 4,999 rupees to 16,901 rupees, or about $270. By appealing more to the middle-class, Apple makes its otherwise deemed luxury brand more accessible to Indian consumers, though again, likely not enough to deteriorate its luxury status.
As the world’s second largest mobile market, India appears to be the exception when it comes to prices for some Apple products, but Apple is still a luxury brand worldwide in its own right.
Could the Luxury Reputation Be Intentional?
While Apple has established a strong foothold in the realm of smartphones, tablets and laptops back in the States, the brand has ultimately positioned itself as more of a luxury brand in other countries—why is that? Could this be intentional on the part of Apple to explore how exclusivity—particularly in countries with vast populations like China and India—might heighten the brand’s inherent value and increase sales over its competition?
The fact of the matter is, with populations as large as China and India, each at more than 1 billion, even a small percentage of buyers would make a vast difference in sales. Thus, being considered a luxury brand and only being bought by a small percentage of the population—at least for now—would still result in millions of sales or more.
To contend with its lower-priced competitors, particularly its chief rival Samsung, Apple needed to figure out some way to achieve a bigger global market share. However, with prices of its devices being as high as they were, this would simply not be possible. Instead, Apple seems to have run with its perceived status as a luxury brand to justify its higher prices, thereby increasing profit per individual sale rather than per a mass of sales at a lower profit margin.
Could this have been intentional all along? Possibly. But without losing its status completely, Apple does need to figure out new ways to get their products in the hands of more Chinese, Indian and other international consumers. It needs to figure out a way to attract the middle class in such a way that the higher price point doesn’t matter and without sacrificing its luxury brand name appeal. Some suggest tailoring features to appease each different country’s consumers, particularly Chinese consumers, who prefer larger screens, for example.
Whatever Apple might decide to do to regain some of its market share is up in the air as of now, particularly with its recent China Mobile deal still waiting for its big rush of sales. Whether Apple as a global luxury brand will stick in other countries all depends on Apple’s future moves in producing and marketing its products outside of the U.S.