Vertu was founded as Nokia’s luxury arm but is now an independent venture after being spun off in 2012. The company makes several-thousand-dollar phones from lavish materials, each hand-assembled by a single worker who engraves their signature on every device. And by all accounts,
Vertu turns a profit on these phones. Often a laughing stock of the
technology industry, which finds it hard to comprehend any purchasing
decision that isn’t based on the price-to-performance ratio, Vertu is
actually well ahead of its time. As technology gets commoditized year on
year, and brands like Samsung find it harder to stand out
against the onslaught of cheaper products that offer most of the same
experience, it’s the high end of the market with the most potential to
thrive and differentiate.

Despite the high-profile hiring of fashion industry figures such as Angela Ahrendts and Paul Deneve, the iPhone 5S tie-up with Burberry last year, and the Apple Watch’s presence on the cover of Vogue China along with its preview event at the Colette boutique in Paris,
Tim Cook spoke in October of the Watch’s warm reception from “people
who know a lot about fashion and style.” To read the subtext, Apple
still doesn’t consider itself among those people. Just this week 9to5Mac reported
that the company is actively attempting to hire fashion-conscious
employees for its retail stores. Apple might not “know a lot about
fashion” just yet, but it desperately wants to be stylish, because it
knows that the high-end market is its best long-term — and most
lucrative — bet.

Of course, Apple is closer to credibility in this space than any of
its competitors. “It’s the only tech company that ‘gets’ branding,” says
Martin Webb of Communion,
a Tokyo fashion PR agency he founded after heading Marc Jacobs’
marketing in Japan. “Fashion people use Apple products because there are
few stylish alternatives.” Users of rival devices may bristle, but
there’s undeniable truth to Webb’s words; walk into a Marc Jacobs store
and you’re unlikely to find many HTC One M8s. As far as phones go, at
least, Apple has the casual fashion customer more or less wrapped up.
But with the Watch Edition, the company will dive headfirst into the
luxury market.

Some commentators believe that the luxury pricing model doesn’t make
sense for consumer electronics — particularly wearable gadgets, for
which the technology is so nascent that anything released today could be
obsolete within a few years. Noted Apple blogger John Gruber, for instance, wrote
that the Apple Watch Edition will likely be expensive enough to blow
the minds of spec-obsessed tech-heads, but nevertheless wondered if
Apple might offer a trade-in program or make the watch’s internals
upgradable so as to make it seem a more rational purchase or investment.
Gruber’s thoughts are insightful, but on this point don’t go far enough
— the Apple Watch Edition will never be a rational purchase or
investment. It’ll be an emotional purchase made by the kind of person
who wants the most luxurious experience possible in the here and now.
“No one needs a Rolls-Royce — we are very open about that,” the esteemed
British carmaker told The Verge this year. “These are purchases of the heart.”

“These are purchases of the heart.”

“A phone is more, in a way, like a car,” says Germade, when asked
whether Vertu customers are concerned with technical obsolescence. “You
don’t buy a luxury car because you want to buy it for the next 10 years
or 20 years or 100 years; you buy a luxury car because even if you use
it for two hours every three days, you want to have the best experience
that you can have. If you look at the difference between when you buy a
car and when you sell a car, you will realize that it’s actually a huge
investment for a product that you use a few times a week.” In other
words, the kind of person willing to drop thousands of dollars on an
18-karat gold Apple Watch that performs the same as a $350 aluminum
version is the kind of person willing to do that every couple of years
as necessary.

“Take it to the next level, think about luxury travel,” adds Germade.
“You fly from London to Hong Kong first-class with your wife; that’s
going to cost you more perhaps than one of our phones. And it only lasts
14 hours — why does it make sense? Because the experience of flying
first-class is how you feel when you’re flying first-class. It’s not
about ‘Oh my God I’m paying this money and it’s going to last me 20
years;’ it’s 14 hours and it still makes sense because of the intensity
of the experience.”

The technology industry is resistant to the idea of price being
connected to anything other than technical performance, after decades of
racing to the bottom in an attempt to attain mainstream acceptance. But
these principles avoid the truth that well-made electronic products
could be perfectly suited to a luxury audience. Mobile devices are the
most important and personal item each of us carry every day, and
wearable technology has the potential to skyrocket the intimacy we feel
toward our gadgets. So why shouldn’t they be more personal, luxurious,
and — yes — expensive? “The amount of usage you have with a mobile phone
is nothing compared to any other product,” points out Germade. “So do
not try to do this comparison with purchasing a [traditional] watch and
purchasing a mobile phone. You have to compare it to purchasing luxury
experiences like hotels, like restaurants, like traveling, like cars.
This is where you realize that it makes all the sense in the world.” If
Apple’s promise of “the most personal device we’ve ever made” comes to
pass, and consumers start to see it as an essential part of their lives,
an expensive Apple Watch targeted at the luxury market could make just
as much sense as a Vertu phone.

But it’s unclear whether the Edition will be enough. It is, after
all, almost exactly the same product as the $349 versions of the watch,
materials aside. “I don’t know what the price point is for the Edition,
but I doubt it’s going to qualify as a ‘luxury’ watch,” says Webb.
“Remember that high-end customers in the watch world are paying $75,000
to $250,000 or more,” says Gene Stone, author of The Watch.
“My sense is that the extra money people would pay would go more toward
functionality than looks, i.e. ‘My watch can do things your watch
can’t.’” With the same screen and form factor as the cheaper models, the
Apple Watch Edition could struggle to gain credibility with luxury
consumers.

Even if the watch itself is attractive, it’s hard to imagine many
walking into a crowded Apple Store and making a multi-thousand-dollar
purchase on the sales floor. Customer support is a big part of the Vertu
offering, including 24-hour concierge services and personal contact
with the manager of each boutique before the phone is even bought. “Of
course the quality of the product matters, but the key point will be
sales strategy, which is very different for luxury goods,” says Webb.
“[Apple] will have to build a team that can execute sales operations
suited to HNWIs [high-net-worth individuals] in tandem with a sustained
and sophisticated below-the-line marketing campaign.” To put it another
way, Apple’s knack for catchy TV ads isn’t going to help much with the
type of customer it’s aiming to attract. It may need to rethink its
retail experience altogether.

As the Apple Watch represents a new product category for the company,
the Edition will be a tentative step into a whole new category of
consumer. And even for Apple, which has better brand cachet in fashion
circles than any technology company, it’s not clear whether wearable
devices will take off with anyone outside the early-adopter gadget set.
“If it’s not meaningful for people, it’s just a gadget,” says Vertu’s
Germade. “I’m personally not interested in gadgets and neither are our
customers.” While the Watch’s design is broadly appealing and the straps
offer some level of customization, it might not be enough to overcome
the fundamental fashion problem posed by everyone wearing the same thing
on their wrist. “The straps are fun but they’re not going to give
people that strange and somehow satisfying sense of owning something
different from someone else,” says Stone.

As with the iPhone, then, Apple’s first challenge with the Watch is
to demonstrate how it will become an essential part of mainstream,
modern life. That’s how Vertu can justify its prices to its customers —
your phone is the most important object you own, in many ways, so why
not make it as personal and special as possible? Apple would arguably be
better off addressing the luxury market with the iPhone, a product that
defined a category and changed the world. But as for the Watch? The
jury is still out on whether regular people will want it, never mind
whether others will spend thousands of dollars on it.