Competitive Analysis: 5 reasons why Apple in-store iphone trade-in program should not impact

Apple recently announced its iphone trade-in program whereby consumers can walk into an Apple store and trade-in their old phones and walk out with a new phone. While minimal details are still available on the program, as a product manager, I was left to wonder if this program constitutes a threat for established trade-in programs such as Gazelle? Full disclosure: I was the Director of Product Management at Gazelle 2 years back and am an employee  investor in Gazelle. But I have not been asked by anyone at Gazelle to write this post and it represents a product manager’s opinion on a competitive threat from a company with deep pockets.

Here are the five reasons why I think Apple in-store trade-in program should not impact

  1. Inconvenience: Apple’s new program is only available via its retail stores.There are only ~250 stores in the US. Only 20% of iPhone sales happen in their stores. 80% happens via carriers, online sales and retailers such as Best Buy, Walmart etc. (Source: TUAW). 250 stores does not represent great coverage for US customers of iphones. For example, the nearest Apple store to me is 22 miles away. I have always bought my iphones via the Apple website because I am not driving that far and standing in line. Every time I have visited the store during the early days of a new iPhone, the store has been sold out of the new phone.
  2. Price paid: All news articles point to a trade-in price of upto $250-280 for an iphone 5 16GB (AT&T) in excellent condition. Gazelle at the time of writing this post pays $330 for the same phone. That is an extra $50-100 in your pocket if you lock in the price today with Gazelle.
  3. Can only trade-in an iPhone for an iPhone: Among the people switching brands, Apple took in three times more customers from Samsung (33%) than Samsung took away from Apple (11%). (Source: Apple’s trade-in program does not help these Samsung customers, while Gazelle is a viable choice because they accept Samsung trade-ins.
  4. Have to buy a new iphone: Apple’s trade-in program works only if you want to purchase a new iphone. You cannot get a store credit or walk away with the cash. No such restrictions at Gazelle. So if you have already switched to other popular phones such as Samsung Galaxy 4, you are out of luck. While this may seem to be a weak argument because of the strong loyalty of iphone customers, it is a factor you cannot discount.11% of users who switched to Samsung Galaxy were prior iPhone users.
  5. Not sure if Apple is serious about the trade-in program: I am not convinced that Apple is serious about this program. This is the second avatar of a trade-in program being launched by Apple. There has always been an online program that they have had, but not something they have promoted. While I am a huge Apple fan for the products it creates, I have never been a fan of its customer service in its retail stores. My previous post of How Apple sucks at customer service is the post with highest comments and 6 years later still gets comments from pissed off customers. How much marketing muscle Apple will put against this program remains to be seen. In the mean time, iPhone trade-in programs are the lifeblood of sites such as Gazelle. It is what they do day-in and day-out. Having worked at Gazelle, I know how much effort it puts into the customer experience. Reviews from real customers are testimonials for the great experience provided by Gazelle.

Now will Apple’s trade-in program help Gazelle – absolutely. Electronic trade-in programs are still in its infancy. My best guess is that the number of iPhones traded in are probably about 5-10 million per year. Compare this to 86 million iPhones sold in the US as of 2012 Q2 (2012 is not a typo – could not find the figures for 2013). That means just 10% of the phones are being traded-in. Apple’s foray into the trade-in program is only going to increase the awareness and Gazelle stands to gain by increasing its market share.

What do you think? Do you agree or am I missing the boat? Or is it too early to tell?

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