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Apple iWatch Price More Important Than Features for Buyers

The rumored Apple (NASDAQ: AAPL  ) iWatch has been the Loch Ness Monster of technology products. There have been alleged sightings and lots of stories, but no confirmation. If an Apple watch is coming, nobody other than a select few know when, what it might do, and how it will look.

Regardless of what it turns out to be, interest in the iWatch will be based not on features or appearance, but price.

According to a survey published by investment firm Piper Jaffray, 31% of respondents would be willing to pay between $100 and $200 for an iWatch. Only 15% would be willing to pay more than $300. Considering that the respondents skew affluent, with an average household income of $130,000, the willingness to pay is likely even lower in the general population. 

About 35% of respondents aren't interested in an Apple watch regardless of price, and that's to be expected. But the low willingness to pay for the possible device could become a cause for concern for Apple. 

It seems unlikely that the iWatch -- which is rumored to have all sorts of health functionality -- will come to market below $200. The watch also won't be subsidized by the mobile phone companies the way the iPhone is. Whatever Apple charges for its watch will be the price customers must pay. That likely means Apple will sell the device for pretty close to cost and make money selling apps.

Where is the watch market now?
The market for smart watches is in its infancy. Though there are a number of brands being sold, 78% of the roughly half-million smart watches purchased since October 2013 are made by Samsung (NASDAQOTH: SSNLF  ) . Pebble holds 12% of the market, while the rest of the industry splits 10%, according to NPD, which started tracking the market in October 2013. 

Total revenue for the industry since October 2013 was $96 million. As of June 11, a third of all smart watches were sold during the 2013 holiday season.

What do current watches cost?
Since NPD began tracking the market in October, the selling prices for the various smart watches have fluctuated due to promotions and new models making older watches cheaper.

Average prices have gone as high as $257 and dropped as low as $160. This was primarily driven by Samsung bundling its Gear smart watches with purchases of its Note and Galaxy smartphones. The average price of a smart watch was $189 as of June 11, according to NPD's Weekly Tracking Service.

With prices averaging below $200 for the established leaders at this early stage of the game, it seems like Apple will have to price its device in that range in order to compete.

Young consumers are at least somewhat interested
NPD reports that 20% of consumers say they are interested in purchasing some type of smart watch, with younger consumers expressing the most interest. Among those 16-24 years old, 30% said they were interested, while 25% of those 25-34 years old reported interest. Cost was cited as the No. 1 barrier to adoption.

In order for a smart watch to be a hit and grow the category, it will have to appeal to older demographics as well. The rumored health functionality on the iWatch might offer a wedge into a much older user base, especially if the device can track things like blood pressure that are now somewhat inconvenient to measure. If Apple can build a medically useful device, doctors could end up recommending it for patients and extending the appeal far beyond those in their teens and 20s. 

Will an iWatch work?
In the past, Apple created the categories it then dominated. While MP3 players existed before the iPod, none were as robust a platform. The same can be said of the iPhone and smartphones. There were some Palm and Windows-based offerings, as well as BlackBerry (NASDAQ: BBRY  ) phones, but Apple essentially created the smartphone market. Apple most certainly created the tablet craze. It's possible that the same people who say they don't want an iWatch or a smart watch in general will want one once they see what Apple creates.

Right now, smart watches are at best a niche with very limited appeal. Apple could easily change that if it offers a device with features people did not even know they want. If that's not the case, and the iWatch is merely Apple's take on what Samsung and Pebble are doing, then price will play a major factor in whether the category grows into more than a novelty.

In the past, Apple has been early to market and suffered for it. The Newton paved the way for the iPad, but it's remembered as little more than a punchline now -- if it's remembered at all. For the iWatch, it feels like the timing is perfect. Samsung and Pebble have set the table and now it's time for Apple to step in and try to reach the masses.

There is no guarantee of success, but if smart watches are going to be a big thing, Apple seems the likely company to make it happen. And now seems like the ideal time to try. 

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Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 28, 2014, at 10:52 AM, buklover0 wrote:

    Trust me... Apple should go for the high-end and sell luxury watches. They need to concentrated on what they do best and that is make the best smartwatches that people love. if they look as luxury as some traditional luxury watches and at the same time come with cool and useful features, I will buy one with a heart beat.

  • Report this Comment On June 28, 2014, at 12:03 PM, actreal wrote:

    I am an avid Apple customer as well as a stock holder and am constantly amazed at the shortsightedness and lack of imagination exhibited by professional commentators on the company and it's products.

    There can really be no estimation as to the acceptance of an I watch until we know what an I watch is.

    The thing that people seem to miss is that Apple may not limit there market to "smart watch" customers, but may offer a product that will appeal to anyone who wheres a watch, smart or otherwise.

    The "smart watch" market is obviously much smaller than the watch market and the price people will pay for a watch ranges from $10.00 to $ 1,000.000.00 .

    Apple has added personnel with experience in the design and marketing of luxury designer products and a watch is known to be one of the few jewelry items men feel comfortable wearing and using as a status symbol relative to its value.

    Apple is purported to have multiple styles in the works and I see nothing to prevent the offering of a fully loaded 18qt gold I watch in the multiple thousand dollar price range.

    Forget the "smart watch" market when looking at the I watch and look to the "watch market" for the key to success.

  • Report this Comment On June 28, 2014, at 12:09 PM, actreal wrote:

    Oh, yeah, one more thing. The idea that Apple would sell the I watch for cost is just absolutely the most uninformed comment I have ever heard. Google and Amazon give things away, Apple does not, EVER.

    The watch will have a margin of 30 to 40% as is typical of all Apple products.

  • Report this Comment On June 28, 2014, at 12:42 PM, Oldfool103 wrote:

    I agree with actreal. I own Apple stock, an Air and an old iPad, which has reached the point of replacement. Much as I would love a 5S, the long term cost of an iPhone simply puts it out of my budget. I fear the same for the iWatch. I am sure it will be beautiful, I am sure the possibility of continually monitoring my blood pressure would fit well with my neurotic overview of life, and I am sure that it will have features I would love to experience; but the cost of pairing it with an iPhone--or even the low cost iPod--would feel prohibitive. I have learned that a cellphone can be a pocket watch along with a communications device, which means I no longer have to she'll out $50 for another Timex. For those who regularly spend 100s or even 1000s of dollars on watches as jewelry, they will be the market and I have every expectation that Apple will rise to that challenge. I also expect that some percentage of them will have their lives lengthened by owning one. For the rest of us, there will be some Bezos' knockoffs that will cost much less, do much less,and not require a smartphone to tell us when our time is up.

  • Report this Comment On June 28, 2014, at 12:46 PM, skyisfalling wrote:

    I thought the loch-ness for AAPL was the Apple T.V. I am glad the analysts forgotten about the Apple T.V.

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Daniel B. Kline

Daniel B. Kline is an accomplished writer and editor who has worked for the Microsoft's Finance app and The Boston Globe, where he wrote for the paper and ran the business desk. His latest book "Worst Ideas Ever" (Skyhorse) can be purchased at bookstores everywhere.

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