Remember Gazelle? Gazelle was one of the major used iPhone buyback services. Every time Apple released a new phone, Gazelle was there, buying folks’ previous generation phones, giving them cash to pay for the newest shiny.
Erin Griffith, writing for Fortune, describes Gazelle before Apple entered the Gazelle space:
Gazelle, a Boston-based e-commerce company which buys and sells used smartphones, has raised $61.9 million in venture backing from RockPort Capital Partners, Venrock, Craton Equity Partners and Physic Ventures, according to CB Insights. In 2013, the company had $113 million in revenue.
$113 million in revenue, just two years ago. Pretty healthy.
That year, Apple launched its own trade-in program. This year it launched one for non-Apple phones.
Apple’s move may have hurt Gazelle’s sales. Last week, with hardly a peep, Gazelle sold to a kiosk business called Outerwall for just $18 million.
Think about that fall. From annual sales of $113 million, and a valuation way north of that figure, to a sale at $18 million, just two years later. Wow. Just a reminder of the mercurial nature of the tech space.
While it is not certain that Apple’s move directly impacted Gazelle’s sales, it’s not an unreasonable conclusion to draw.
Personally, I appreciate the convenience of trading my device in at the Apple Store. Though it’s possible I could get a better deal shopping my used iPhone around to sites like Gazelle, going directly to the Apple Store means no hassle for me, and the knowledge that Apple will either repurpose my used phone or recycle it, both things that work for me.
[H/T the psionically enabled not Jony Ive]
I would throw some credit/blame to Swappa. Gazelle made it very easy but drastically undervalued the devices it bought. While listing on Swappa or wherever takes more effort, the return on that effort is significant over Gazelles low balls.
The secondary market for used phones has existed for many yeas. I new someone who sold trade in feature phones in developing markets in the 90s and did quite well. Gazelle and their ilk turned it into an extremely easy to use public facing service and market.
Once that beachhead had been cleared, and the revenue proposition has been spelled out, Apple (and others soon to follow) have indeed leveraged this phenomenon.
My guess is that once this program takes hold, Apple will be able to sell reforms and cast offs in developing markets at a higher profit margin than their retail offerings.
I work at a place that tests, refurbishes, and resells phones and tablets. While we make good money on the newer things, you might be amazed at the profit margins that can still be had on feature phones. We’ll often buy a lot of feature phones for $1-5 a piece, and resell them at $30-40 each. (This is market driven. All the resellers watch each others listings like hawks and adjust prices accordingly.) Dollar for dollar, they make more or the same as the new stuff.
The thing hurting our business the most lately is the new financing options. People will still owe money on their phone via the monthly payment schemes, then they’ll resell it or trade it in and buy a new phone for full price. As long as they keep paying their bills, the phone is good, but we can’t resell the financed phones. At any moment they could miss a payment and the phone will be cut off.
We do get a lot of phones from store trade-ins/refurbs, so the trade in business Verizon, AT&T, Apple and others do actually is the least of our problems.
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When I went to trade in my iPhone 6, the Apple Store quoted me a price that was $5 lower than Gazelle. I’m not the sort of person to spend time shopping my phone around to the highest bidder, so it was totally worth it to just take the in-store trade-in. I could easily see that happening across the board.
What will be interesting to see is if a weakened Gazelle leads to higher or lower trade-in prices going forward…
Second. I feel like they’ve built up a solid brand in this space, but they squander it with lowball offers. I got practically double the price for my iPhone 6 Plus from Amazon (granted, it’s a gift card) than Gazelle offered.
I jumped on Apple’s new installment plan. Now I’ll get a new phone every year and won’t have to deal with trade-in or sale hassles.