With iPhone 5 imminent, users sell older models in record numbers

Interest in next iPhone 'unprecedented,' says one recycler

iPhone 4 trade-in business has been very brisk at companies that buy older smartphones, an early indication of how Apple's next model will sell, the firms said.

Apple is expected to unveil its next iPhone -- what most have named "iPhone 5," although that may not be what Apple calls it -- during a media event at its Cupertino, Calif. headquarters Tuesday at 10 a.m. PT.

Interest in the new iPhone is high, said Jeff Trachsel, the chief marketing officer at NextWorth, judging by the volume of trade-in transactions the company has conducted in the last week.

That was when NextWorth kicked off a promotion that guarantees a $250 payment for any 16GB or 32GB iPhone 4 that runs on AT&T's network. The deal expires today.

"Volume is running about 15X-16X above prior to the announcement [of the promotion]," said Trachsel. "We've seen a huge spike, and we're on track to have our biggest [iPhone trade-in] day ever."

"The number of iPhone trade-ins has doubled over the past week," echoed Anthony Scarsella, the chief gadget officer at rival Gazelle. "Last year we did a total of 30,000 trades around the iPhone 4, and it looks like this year that will double."

Scarsella called Gazelle's trade-in volume "unprecedented," and said that showed intense interest in the iPhone 5. He attributed that increased interest to the longer period of coverage by news media and blogs because Apple departed from its usual June or July launch with the iPhone 5.

"This model didn't follow the typical Apple release, and the later [launch] created even more hype about the iPhone 5 or iPhone 4S, or whatever they call it," said Scarsella.

Gazelle has also seen a spike in trade-ins of Android and BlackBerry smartphones in the last three weeks -- a 102% increase in the former -- which Scarsella interpreted as a rush by those consumers to dump their phones in preparation for buying a new iPhone.

The number of U.S. iPhone 4 owners who decide to sell their existing smartphone will get an even bigger boost if AT&T decides to relax its rules on who can upgrade to a new model at the subsidized price, said Trachsel of NextWorth. "But it remains to be seen if carriers will let customers trade up by locking them into another contract," he said.

Last year, AT&T announced that any iPhone owner scheduled for upgrade pricing between the launch of the iPhone 4 and the end of 2010 was immediately eligible for the lower, subsidized prices of $199 and $299.

The year before, AT&T customers raised a stink over a $200 surcharge that the carrier levied on customers who had not fulfilled most or all of their two-year contract. Under pressure, AT&T relented, giving immediate access to the lower prices to customers eligible during a three-month stretch after the iPhone 3GS debut.

"It's safer to say that [trade-in] volume will increase if AT&T does what it did last year," said Trachsel. "It creates a bigger pool of people who may want to trade in their iPhone 4."

NextWorth and Gazelle wipe incoming iPhones, refurbish the devices, then sell them direct to consumers via eBay and Amazon.com, as well as to resale wholesalers.

Scarsella said there was a relatively narrow window for iPhone owners who want to trade in their older smartphones.

"The best time to trade in is from now until the day the new iPhone goes on sale," said Scarsella. "Although prices may stabilize or even rise then, once the new iPhone is out, prices will quickly drop."

Apple will presumably announce the on-sale date for the new iPhone tomorrow; most bets have been put on Oct. 14.

Gazelle is buying 32GB iPhone 4s for just over $200, said Scarsella, but those in what it calls "flawless" condition bring in $284. Sellers can get a quote by using the condition calculator on the company's website, or by downloading a free iPhone app from the App Store.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His e-mail address is gkeizer@computerworld.com.

See more articles by Gregg Keizer.

Copyright © 2011 IDG Communications, Inc.

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