In the week and a half since Apple’s biggest keynote event of the year, there’s been plenty of praise for its new flagship product, the iPhone X. It’s been hailed as the “future of the smartphone,” with features people have been dreaming of (or demanding) for years: an edge-to-edge display, an organic LED (OLED) screen, wireless charging and more. But on top of its tech specs, the iPhone X represents a more fundamental shift that has occured under Tim Cook’s leadership: Apple’s steady move toward designing products that cater to the luxury market.
The iPhone isn’t the first of Apple’s product lines to succumb to this new vision, but rather an unsurprising development, given the company’s trajectory over the past few years—a period that really began with the hiring of Angela Ahrendts, the former CEO of Burberry, and the launch of a new and very different product than any it had released in the past.
The Pure Luxury Timepiece
Apple showed the importance it placed on catering to the luxury market when it launched the Apple Watch. First announced in September 2014, the Apple Watch was launched with a marketing campaign unlike any other Apple had done in the past. Instead of being revealed through a series of well-crafted ads, the Apple Watch graced the covers of fashion magazines, was photographed on the wrists of celebrities and was showcased to the biggest names in fashion at a special event hosted by Colette during Paris Fashion Week. If the luxury-focused marketing blitz didn’t make it clear which segment of Apple’s customer base the Apple Watch was meant to appeal to, the release details certainly did.
Alongside the Apple Watch designed for the typical consumer (which was positioned as a fitness band) was a new class of product unlike anything else Apple had released in the past: the Apple Watch Edition, made of real gold, which sold for between $10,000 and $17,000 a piece. The Edition model sent a clear message about the company’s intent, and while the gold versions were discontinued after the first generation, expensive bands bearing the name of Hermès continue to sell for several hundred dollars, along with a $1,300 ceramic Apple Watch Edition for people with more money than they know what to do with.
The move toward a more luxury approach to its products is not confined to new product lines. At the same time as the Apple Watch was released in 2015, Apple also began refreshing its MacBooks with a similar trend of style over substance and prices that, in one case, even caused outrage.
Style-Over-Substance Computing
Ever since the MacBook Pro was redesigned to include a Retina display, many Apple users began pining for a similar hardware update to the MacBook Air. The Air was a versatile computer with a wide appeal, and while it might not have been the most powerful computer on the market, it was incredibly portable and could handle the tasks that the majority of everyday users threw at it—not to mention that it had a very reasonable price, especially for Apple.
Then in March 2015, something shifted in Apple’s strategy. That was the month when the company unveiled the 12" MacBook with Retina display. Was it comparable to the Air, a relatively affordable portable laptop? The 12" MacBook with Retina display was certainly portable, but that’s where the comparison with the MacBook Air ends. It was an underpowered machine with an exorbitant price.
And while its high price didn’t buy power, it did give customers a range of metallic colors to choose from that positioned the machine as a status symbol. Everyone at Starbucks would know that you had the latest and greatest. It was the perfect complement to the Apple Watch—overpriced and not particularly functional, but nice to show off.
Apple did a similar redesign of the MacBook Pro in 2016. It raised prices, cut performance and introduced the largely pointless Touch Bar (perhaps to make up for the fact that it refused to include a touch screen in its laptops). The company’s executives seemingly forgot that performance really matters to the “pros” who are interested in the high-end laptop, and they scrambled to put together a range of upgrades to placate those users: better MacBook Pro performance, an iMac Pro and a long-overdue Mac Pro refresh. But even these didn’t eschew the higher price points and prioritization of aesthetics that have come to define Tim Cook’s Apple. Endorsements from creators and artists are key to Apple’s brand image, and the prospect of losing them to Windows demanded a response.
A New Approach to the Moneymaker
Given the percentage of Apple’s total revenue that comes from the iPhone—it’s hovered between 60 percent and 69 percent during recent years—it’s no surprise that the company waited before seriously applying this vision to the iPhone. But that doesn’t mean they didn’t start testing it much earlier.
The introduction of the iPhone 6 Plus in 2014 planted the seed in customers’ minds that there could be multiple flagship iPhones, and that those with premium features would cost more. The iPhone X is the natural progression of this idea.
The positioning of the iPhone X as the “luxury” iPhone is merely the completion of Apple’s post-Jobs business trajectory. Like the Apple Watch and the MacBooks, the iPhone X isn’t about improved performance; it uses the same processor as its brethren, the iPhone 8 and iPhone 8 Plus. And it removes the well-liked Touch ID security feature to accommodate its edge-to-edge design and adds a new status symbol for wealthy teens everywhere: Animoji, which seem to have been inspired by one of Black Mirror’s dystopian visions of the future.
But why is this happening? Why is Apple shifting its business model to increase its appeal to a small group of people with plenty of money to spend? Quite simply, it all comes down to inequality.
The Economic Shift behind Tim Cook’s Apple
These numbers won’t be new to many people, but the perspective of how they’re impacting the economy may be. In 2015, Pew Research reported that fewer than half of Americans are now in the middle class, as the ranks of both the upper and lower classes grew. This is largely a result of the fact that for many workers, wages have stagnated since the 1970s, while the incomes of those at the top have soared.
The top 10 percent now receive half of all income—a significant change since the 1980s—and when it comes to wealth, the numbers are staggering: the 20 richest billionaires own more than the bottom half of the country (152 million people) combined. Inequality has even reached levels not seen since 1928, right before the Great Depression. Considered together, these figures show that the rich have a lot more money to spend than they did in the past, and it should come as no surprise that Apple wants some of it.
Apple certainly isn’t the only company looking to the luxury market for sales growth, but it serves as an example of how the largest companies shift their business model due to staggering levels of inequality.
As a result of this transfer of wealth from the poor and middle class to the rich, the top 5 percent of income earners were responsible for 38 percent of consumer spending in 2012, up from 27 percent in 1992. Over the same period, the percentage of spending by the bottom 80 percent fell from 46.6 percent to 39 percent.When more money is in the hands of a smaller number of people, they need bigger ticket items to spend it on, which is where Apple’s expensive new products come in; and given that coastal cities are benefitting most from this redistribution of wealth, it should come as no surprise that Apple is catering to its own base of creatives and tech workers, who will have the extra cash to shell out for its pricier products.
Apple certainly isn’t the only company looking to the luxury market for sales growth, but it serves as an example of how large public companies shift their business models due to staggering levels of inequality. That inequality did not simply appear but is the result of the policies of deregulation, privatization and austerity that governments have pursued over the past several decades because of pressure from large corporations like Apple (and the think tanks they fund). Many of the deeper effects of this economic shift are hard to identify, but there can be no denying that their benefits accrue to a small few.
Tim Cook is a numbers man, so it’s no surprise that he’s altering Apple to better capitalize on inequality. The iPhone X isn’t the beginning of this shift; it completes a product line designed to cater to those who are capturing a growing share of national income. Apple’s flagship products were previously expensive but still attainable, yet now they’re increasingly out of reach for a larger number of people. And until income and wealth are more equitably distributed, the clout of the middle class will continue to decline as corporations pay more and more attention to a burgeoning class of plutocrats.
