According to Troy Wolverton, an opinion writer for Business Insider, Apple has transformed itself into a luxury brand.
While releasing phones costing $1,000 or more and moving its services to the higher end are paying off for the tech giant now, it might run into some financial potholes down the road.
It’s not a shock that Apple is playing “in the more affluent end,” Wolverton says. “Its Mac computers have typically been more expensive than their Windows-based rivals. And its new iPhones have always carried a premium price over competing smartphones with similar performance.” This strategy has enabled the company to rocket past a trillion-dollar market cap.
However, Wolverton suggests that conducting business like this might not be sustainable long term. For example, as prices of Apple’s devices continue to climb, customers might shy away from buying new products, or might not be able to afford them. “With iPhones costing more, Apple fans are likely to hold on to their phones longer, upgrade less often, and trade down for lower-price models when they do replace their devices,” Wolverton says.
Another strategy – removing its least expensive product, the iPhone SE, from the market – might quicken a potential failure. Wolverton says this move might deter customers from walking through Apple’s doors. “As most retailers know, low-priced items can often be a good way to get customers in the door,” he says. “Those devices themselves may not be terribly profitable, and the retailer may not really want to sell them, but they can use them as a lure. Once it has drawn customers in, the company has the opportunity to upsell them on pricier, more profitable items. Without them, the company never has that chance with some consumers.”
Wolverton also says that one of Apple’s main streams of business has been influencing end users to sign up for its internet-delivered services, like Apple music or additional iCloud storage. When customers walk away from these services, and then Apple’s expensive hardware, the company loses future business.
Finally, Wolverton recommends keeping an eye on Apple’s progress becoming a luxury brand; he anticipates its businesses strategies to boost its profit in the next quarter. But, “don’t be shocked if the move ends up biting the company down the line,” he says.