Cliff Kuang:
A few years ago, the CEO of Vertu was showing me the company’s newest $8,000 phone, bragging that the gadget was far more substantial and well-made that any $500 iPhone could hope to be. I stopped him short, pointing out that the iPhone isn’t a $500 gadget. It’s a $1 billion gadget. After all, how many billions has it cost in R&D, to develop all the gobsmacking manufacturing techniques, all the software tricks, the App Store, and all the battery tech inside? The reason it costs so much less than a Vertu isn’t because it’s less well made. It’s because 700 million people have helped amortize Apple’s investment in it.Apple now seems hell bent on finding new ways to flex that muscle.This is exactly right. Luxury brands look at Apple and see a low sticker price. What they miss is the billions in R&D spending behind the sticker — and the hundreds of millions of units shipped that feed this machine and allow for the sticker price to remain so low.
They don’t think Apple is a competitor because people pay more for luxury. For some people, that’s sort of true — though it’s more paying for a brand or lifestyle. But most people are content to pay for quality. And Apple often tops the luxury brands in this regard. Which is problematic for them, to say the least.
