The Market Impact of Apple's New iPhone Trade-In Progam

Apple is developing a new revenue stream with the introduction of their newly minted iPhone Trade-In Program. It seems as if, after watching companies like Gazelle, NextWorth, and eBay profit off iPhone resales, Apple has decided to cash in on the high resale value of the iPhone themselves. Even though this program only allows you to trade in your iPhone towards the purchase of a newer iPhone model, Apple’s new program is set to grab market share away from these industry players.

To set the background, here’s how the program works:

While other outlets like Best Buy and carrier-run stores offer iPhones for sale, Apple’s trade-in program is only available from its retail stores. The service is offered at Apple retail locations either on the store floor or at the store Genius Bar. After visiting a retail store and meeting with an Apple employee, a customer explains that they would like a new phone and are willing to trade in their old one. The Apple employee will then inspect the phone, ensuring that it powers on and is free of water damage, and then set a value for the phone based on color, physical shape, and overall cleanliness, assuming it functions properly. Apple has partnered with a repurposing company called BrightStar, who is able to provide real-time pricing information for trade-ins based on its own market analysis and forecasts; this process takes place on the EasyPay devices that all Apple employees tote around the store. Currently BrightStar is offering around $250 for a 16BG iPhone 5, and all iPhone generations, so long as they work, will generate some value. iPhones with broken displays or other significant physical defects will also generate an offer from Apple, though the value will be considerably less.

While similar in principle, there are a few differences between Apple’s new program and the existing buy-back programs from Gazelle and NextWorth. For one, Gazelle and NextWorth operate solely online; their users mail in products, receive estimates, and either request their devices back or receive an electronic payment. Apple’s program operates from physical locations, and users receive any payment via Apple credit. Consumers can get their new iPhone for a discounted price or even for free after trading it in, and any remaining balance after the purchase goes on to an Apple gift card. Secondly, and not so favorable for Apple, Apple’s new trade-in program is limited to iPhones, while Gazelle and NextWorth will purchase both Apple and non-Apple devices. Finally, and really not favorably for Apple, is the difference in the prices offered for old devices. Competitors like Amazon, Gazelle, NextWorth, and Best Buy are offering between $315 and $400 for a 16 GB iPhone 5 in good condition. How does Apple plan to compete by buying back a limited number of products compared to others in the field and offering less money for them?

For starters, Apple considers this program part of its “reuse and recycling” program. This program’s purpose is not solely to save trees; there are numerous incentives for Apple to roll-out this trade-in program.  In addition to the benefit of an environmentally responsible image, Apple, through this program, simplifies the trade process and makes it very easy for many iPhone users to stay loyal to the company. Consumers can just walk in to an Apple store, trade-in their old iPhone and walk out with a new device. Convenience is a major leg-up that Apple holds over the competition. One can utilize this program and skip out on the hassles that come with payment security, shipping and receiving, service charges, and other pain points that are associated with the online buy-back market. Yes, Apple is offering a lower price through their trade-in program, and yes, they are selective in the fact that they will only accept iPhones for trade-in, but a significant amount of consumers will choose convenience over value. Overall, the convenience and immediacy of this program will combine to drive consumers to utilize this program and companies that make profits from iPhone resale’s should definitely expect to take significant hit.