Apple is underpricing some of its devices and wearables to try and entice new users to embrace the company’s device ecosystem, according to an Apple analyst.
This is an effort by the company to make its various products more accessible to new consumers through lower price point, analyst Neil Cybart of Above Avalon wrote in a March 15 research note. The two underpriced products that Cybart focused on in his article are the Apple Watch and Apple’s AirPods wireless Bluetooth headphones.
“In just ten years, we have moved from the ‘Apple Tax’ days, when Apple was accused of pricing products artificially high, to apple products being priced below the competition,” Cybart wrote. Apple is using its balance sheet and scale to grab new users, and in the process, redefine luxury.”
AirPods, Cybart claims, are underpriced — citing that Apple’s new wireless earbuds aren’t just “any pair of headphones,” and are more akin to “computers” for user’s ears. Unlike normal headphones, AirPods integrate technology such as accelerometers, optical sensors, an advanced charging case and Apple’s new W1 chipset. As evidence, Cybart looked at the pricing of truly wireless headphones just prior to AirPods’ release — with most offerings retailing between $199 and $300. Apple, by contrast, “sent shockwaves pulsing through the market” by pricing their wireless earbuds so low, thereby forcing competitors to slash their own prices.
“The idea of Apple coming out with a new product that would underprice nearly every other competitor was unimaginable ten years ago,” Cybart added.
Cybart also pointed out that various Apple Watch models are similarly underpriced among luxury wearables. At $269, Cybart writes, the Apple Watch Series 1 “is one of the lowest-priced smartwatches worth buying on the market.” he added that “attractive pricing” helped the Apple Watch capture record sales over the holiday shopping season.
“In fact, even the Apple Watch Series 2, at $349, is one of the lowest-priced smartwatches in its class,” he added, citing examples ranging from the Garmin Fenix 5, which retails for $599, to the Samsung Gear S3, which is also priced at $349. Apple may have reached a level of efficiency that has allowed these lower price points, Cybart noted, which could help make their products appealing to a wider variety of consumers. Similarly, the higher-priced Apple Watch models likely offset the lower margins of underpriced devices, he added.
Of course, not all Apple devices seem to follow this underpricing dynamic. The 2016, 15-inch MacBook Pro with Touch Bar, for example, starts at $2,399. And Apple rumor has it that various models of this year’s 10th anniversary iPhone X could push into the quadruple digits.