Apple Watch Debut Marks a New Retail Strategy for Apple

Don't expect long lines of gadget-seekers

Review: A Week With the Apple Watch

The Apple Watch went on sale in stores Friday. Whether you can just walk into an Apple Store and buy one is another matter.

The debut of Apple Inc.'s first new device in five years looked more like an event from the fashion world rather than the tech world. This time, there weren't long lines of faithful gadget lovers waiting for hours and days to buy the latest product from the Cupertino, California-based company.

Paris's Colette, London's Dover Street Market and Tokyo's Isetan are among the high-end department stores joining the global rollout of the Apple Watch, which ranges in price from $349 to $17,000 for a gold version. Those shops, plus an undisclosed number of authorized resellers, may be the only places where people can actually buy the new smartwatch. Apple Stores are only showcasing the device, and the company is urging customers to place orders online.

"Classic fashion industry play," Howard Feller, a partner at MMG Advisors, an investment bank that specializes in retail, jewelry and fashion, said of the Apple Watch introduction. "Every one of those locations are where trends are set, where new brands are introduced and where the customer who is absolutely hyper sensitive to the latest fashion trends will go to see what's new for the season. Everything from the fashion world trickles down from there."

A customer views Apple Watches at an Apple Inc. store in Palo Alto, California, U.S., on Friday, April 10, 2015. From London to Beijing, Apple stores saw few customers lined up before opening Friday as pre-orders started. The first new gadget under Chief Executive Officer Tim Cook is selling in eight countries and Hong Kong, with shipments scheduled to start April 24. Photographer: David Paul Morris/Bloomberg
A customer views Apple Watches at an Apple Inc. store in Palo Alto, California, U.S., on Friday, April 10, 2015. From London to Beijing, Apple stores saw few customers lined up before opening Friday as pre-orders started. The first new gadget under Chief Executive Officer Tim Cook is selling in eight countries and Hong Kong, with shipments scheduled to start April 24. Photographer: David Paul Morris/Bloomberg
Photographer: David Paul Morris/Bloomberg

Angela Ahrendts, Apple's retail and online sales chief, has directed staff across eight countries and Hong Kong to send shoppers to its website to buy the device, which has a touch-screen display and works in tandem with an iPhone for messaging, directions and other applications. Initially, the Apple Watch wouldn't be available in Apple Stores for purchase on the first day, she said in a video that emerged this week.

"The Watch is an entirely new category," Ahrendts told staff in the video. "It's much more personal with all of the different options. We really wanted the customer to work with you so you could guide them, take the time to get the one they wanted and by doing it online we could make sure that we get them the best service and the one they want the most efficiently."

Customers have been able to schedule demonstrations of the watch in Apple Stores since April 10, when online pre-orders began. The first batch of deliveries began arriving Friday. Shortly after Apple started accepting early orders, shipment times quickly pushed past that date, with some customers being promised delivery in four to six weeks or into June. Other buyers began receiving messages this week informing them that the watches were shipping earlier than expected.

"Our team is working to fill orders as quickly as possible based on the available supply and the order in which they were received," Apple said in a statement this week. "We know many customers are still facing long lead times and we appreciate their patience."

A customer tries on the Apple Watch at an Apple Inc. store in New York, U.S., on Friday, April 10, 2015. From London to Beijing, Apple stores saw few customers lined up before opening Friday as pre-orders started. The first new gadget under Chief Executive Officer Tim Cook is selling in eight countries and Hong Kong, with shipments scheduled to start April 24. Photographer: Michael Nagle/Bloomberg
A customer tries on the Apple Watch at an Apple Inc. store in New York, U.S., on Friday, April 10, 2015. From London to Beijing, Apple stores saw few customers lined up before opening Friday as pre-orders started. The first new gadget under Chief Executive Officer Tim Cook is selling in eight countries and Hong Kong, with shipments scheduled to start April 24. Photographer: Michael Nagle/Bloomberg
Photographer: Michael Nagle/Bloomberg

The Apple Watch rollout is part of a bigger strategy to make the gadget more appealing to the fashion world. To that end, Apple bought a large advertising spread in the March issue of Vogue, displayed the device at the Colette during last fall's fashion week and hired a slew of fashion-industry executives, including Ahrendts, the former chief executive officer of Burberry Group Plc.

Other high-end stores selling the watch Friday include The Corner Berlin and Maxfield in Los Angeles, which appears to be the only store in the U.S. to get the watch. "There's an Apple Watch for you at Maxfield," the boutique says on its website. "We've handpicked a range of models to help you find a look to complement your own.''

Shoppers wait to cross a road in front of a Galeries Lafayette department store in Paris, France, on Wednesday, Feb. 4, 2015. The European Commission is
Shoppers wait to cross a road in front of a Galeries Lafayette department store in Paris, France, on Wednesday, Feb. 4, 2015. The European Commission is "limited" in the flexibility it can offer France under the euro area's stability pact because the country's budget gap remains too wide, the Brussels-based commission's vice president Valdis Dombrovskis said in an interview last week. Photographer: Marlene Awaad/Bloomberg
Photographer: Marlene Awaad

The watch has also been previewed at other high-end stores, such as Galeries Lafayette in Paris, which sees more than 50 percent of its traffic from Chinese and international tourists, according to Erinn Murphy, an analyst at Piper Jaffray Cos. "In some of these cities, whether it's Paris or London, you've got an incredible amount of global tourists shopping as well," Murphy said. "It helps reinforce the brand globally."

Sales of the Watch may reach almost 14 million this year, according to the average estimate of five analysts polled by Bloomberg. At Dover Street Market, appointments are required and purchases are limited to one per customer. "We kindly ask you not to queue," the company said on its website.

"They're going after the top because of the trickle-down effect," said Robin Lewis, CEO of The Robin Report and co-author of The New Rules of Retail: Competing in the World's Toughest Marketplace, which explores Apple's retail strategy. "Scarcity just creates greater, more intense demand."

At London's Dover Street Market, more than 20 people were in line about 20 minutes before opening Friday morning. Their fashion sense was a mixed bag as geeks and chics mingled—though mostly geeks, including one guy in yellow sneakers and a fanny pack. Another fellow carried a tan Burberry shoulder bag.

Tokyo's Shinjuku district rises above the forested Imperial Palace grounds and buildings January 16, 2003. Photographer: Rudi van Starrex/Bloomberg News
Tokyo's Shinjuku district rises above the forested Imperial Palace grounds and buildings January 16, 2003. Photographer: Rudi van Starrex/Bloomberg News

At Isetan, located in Tokyo's Shinjuku shopping district, the Apple Watch display is located on the ground floor, where jewelry and cosmetics are sold, near Cartier and Prada displays. Through April 26, however, Isetan is only selling watches to customers who reserved them in advance, according to its website. Bic Camera in Tokyo had 10 shops with Apple Watch inventory. The company's Yurakucho shop had a line before opening, said Yuko Harima, a spokeswoman for Bic Camera in Tokyo.

At iSpace, a reseller of Apple products at The Place shopping mall in Beijing, about 10 people were gathered for the 10 a.m. opening. The inventory didn't last long. Staff at the store said the entire stock of about 50 watches sold out within 90 minutes after the store opened its doors.

Lian Shiliang, a 26-year-old software designer, and his girlfriend Diana Dai were two of the first in line at iSpace, and each bought a different version of the product. Lian got the entry-level Watch Sport with the larger screen for 2,988 yuan ($483). "I think the watch will be a good way for me to consult maps when I ride my motorcycle,'' said Lian, grasping his helmet in one hand and an iPhone 6 in the other.

Dai got a smaller, higher-end version of the Watch for 4,188 yuan. Dai, an iPhone 6 Plus user, likes the intimate aspects of the device. "I want to be able to draw picture messages or send my heartbeat to him," Dai said, gesturing to her boyfriend. "It's a new way to communicate that I think is quite interesting. It brings you closer together."

At many Apple stores around the world, the scenes were more subdued. About 10 people were outside the Apple Store on New York's Upper West Side on Friday morning shortly before it opened, with about half there to see the watch. Any hopes of buying one on the spot were quickly dashed. "This is the worst marketing ploy I've ever seen," said Nick Castro, a 33-year-old who works in advertising. He'd called the store twice before Friday to see if there was stock, and said he was told to come to the store and see. "I'm not happy with how they're doing this," he said.

It won't always be like this, Apple has said. “We love our iconic, blockbuster launches that we do in the stores and have absolutely no fear you will see those” again, Ahrendts said in that video message.

That's not surprising to Carmine Gallo, author of The Apple Experience, a book that looks at the company's customer service strategy. "Apple Store leaders are too smart to lose sight of the fact that those launches make Apple unique in the world of retail," he wrote in an e-mail.

—With Takashi Amano and Bloomberg News.

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