Luxury Rollout Works for Apple Watch, Smith Expert Says

SMITH BRAIN TRUST -- Apple is foregoing its customary blockbuster, in-store release of a new device with its Apple Watch. The company last week quietly retracted its previously publicized April 24 release date after taking pre-orders on April 10 and selling nearly one million units (according to PC Pro) on the first day to U.S. customers. The company is taking online orders through its own channels, excluding third-party retailers. The New York Times reports the approach is that of a luxury goods maker.

The strategy makes sense for Apple, given the Apple Watch product line of different versions -- such as the “Sport” and “Edition” -- at prices from hundreds to thousands of dollars, says P.K. Kannan, the Ralph J. Tyser Professor of Marketing Science at the University of Maryland's Robert H. Smith School of Business. “Selling such a product line through its stores would require an ample supply of each model to cater to the preferences of all Apple in-store customers. This is a challenge for Apple, now, given its supply constraints” (as alluded to by Apple Retail senior VP Angela Ahrendts).

The company earlier this month invited potential buyers to its stores to see, wear and feel the watch. “People shopping at retail stores expect to touch and feel the products, buy them and take delivery of them immediately,” Kannan says.
 
The product is slated to become available for in-store purchase by June. But Kannan says the showroom strategy is prudent. “If a retail store does not carry the right mix of an assorted product line, many customers may be disappointed, and an out-of-stock situation can never be good for a new product launch,” he says. “Apple wants to avoid this. Their demo of the watches at stores has given customers the touch and feel of the products. Now, by selling the watches online, they are giving the customers options to choose their preferred model, customize it to their taste and then get it delivered to their home.”
 
Kannan says launching Apple Watch at retail stores would lead to long customer lines -- as is the case with any Apple product launch. “But given the limited supply and wide assortment, many shoppers would leave empty-handed or settle for buying a secondary choice of model,” he says.
 
Launching exclusively online also gives Apple an edge for months ahead. “Apple can gauge the demand and popularity of the different models of the watch, the variations in customization, and thus plan their production accordingly,” Kannan says. “This will also help them plan the right inventory at retail stores when they start selling them at stores.”

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