iPhone Trade-In Program Will Turn Numbers Around, Apple Hopes

In the face of slumping sales and a decline in shares, Apple Inc. is betting that a new iPhone trade-in program, which will be announced this month, will start to turn those numbers around, sources told Bloomberg.

By offering money for older smartphones, including iPhone 4S smartphones, Apple hopes to entice consumers to upgrade to the iPhone 5 while profiting through resales abroad.

Bloomberg said that Apple will team up with mobile phone distributor veteran Brightstar Corp. to handle the exchange program. Brightstar also handles trade-ins for AT&T and T-Mobile US Inc.

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Old iPhone trade-ins have been good business for other companies, said the Washington Post. Companies such as GameStop, Best Buy and online services such as uSell, have accepted trade-ins of older Apple phones in exchange for cash or store credit.

The trade-ins are ultimately sold to emerging markets, such as Southeast Asia, where customers are hungry for the new technology. Trade-in programs are used to support sales of new hardware in mature markets such as the U.S., where many prospective customers already own a smartphone.

“The overall size of this market is increasing rapidly,” said Israel Ganot, chief executive officer of Gazelle Inc., a mobile device trade-in company, told Bloomberg.

“This will help them sell more phones, because it will lower the consumer’s out-of-pocket expense,” said Roger Entner, Recon Analytics LLC in Dedham, Mass. told Bloomberg.

AT&T is currently paying as much as $200 for working iPhone 4s and 4Ss, which could let some customers buy an entry-level iPhone 5 for no money down. Ganot estimates that 20 percent of U.S. consumers buying a smartphone this year will do so using a trade-in, up from 11 percent in 2011.

Darrell Etherington of TechCrunch said this program is different from what Apple has done before but needs more details to see just how beneficial it will be for the customer.

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"The difference in this case from existing plans would be that this trade-in program would be available only at Apple retail locations, allowing for in-person trade-ins of devices that would happen on the spot, allowing them to walk right out with a new device after 'receiving payments' for their older devices," Etherington said in his post. "The report doesn’t specify whether buyers would receive store credit that can be used generally, or a rebate specifically applicable to a new iPhone device."

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