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Apple to kick off in-store iPhone trade-in deals to spur sales

Gregg Keizer | June 10, 2013
Current buy-back vendors like Gazelle and NextWorth not worried, see the move as a 'float-all-boats' opportunity.

Apple will launch its own iPhone trade-in program this month, exchanging older iPhones for in-store credit, according to Bloomberg and other sources.

Companies already active in "re-commerce" -- the buying of used consumer electronics like smartphones and tablets, primarily in developed countries, then refurbishing them for resale in less affluent markets -- took Apple's entry in stride, at least on the surface.

"The biggest challenge to re-commerce is consumer awareness," said Israel Ganot, chief executive of Gazelle, a Cambridge, Mass. firm that buys used smartphones and tablets. "Apple's entry would be a huge validation of re-commerce. They're going to change consumer behavior and make it much more mainstream to sell your old iPhone."

Glyde.com, a company founded by former eBay executives that is also in the buy-back business, echoed Ganot. "We think this is great in that more consumers will see that their used devices still hold significant value," a company spokesman said in an email.

On Thursday, Bloomberg, citing unnamed sources, said Apple would debut the trade-in program this month. Consumers will hand over used iPhones to Apple at the company's retail stores, said the news service, and the phones will be re-sold in developing markets by Miami-based Brightstar, a buy-back firm that has partnered with scores of retailers -- including Wal-Mart and Target -- and carriers, such as AT&T and Verizon.

Bloomberg did not say whether Apple will offer cash or in-house credit -- the company already has an online re-purchase program that exchanges iPhones for Apple gift cards -- but Ganot said he understood that Apple would continue to swap hardware for the spend-only-with-Apple gift cards.

Ganot had expected Apple's move. "We've thought they would do this for some time," he said. "It makes sense for them."

Apple's motivation, Ganot speculated, is to drive new iPhone sales by making trade-ins easier for current customers as the replacement market dominates developed countries. "By essentially providing a 'discount' for new iPhones, they can accelerate sales and drive up their share in places like the U.S., where the smartphone market is getting saturated," Ganot said.

According to a recent survey by the Pew Research Center, 56% of American adults now own a smartphone.

And there are more than enough older iPhones gathering dust -- and buyers in developing countries eager to get their hands on a less-expensive iPhone -- to keep third-party traders in business, even with Apple's entry, Ganot maintained.

Only about 20% of U.S. consumers buy a smartphone after trading in an earlier model, Ganot estimated. In the U.K., he said, where trade-ins are a more established practice, that number is closer to 30% among younger users. While not everyone will trade in, Ganot said it's not unreasonable to assume that the smartphone sell-back market could reach the same 40%-50% of new car purchases that involve a trade-in.

 

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