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Apple kicks off iPhone trade-in program

Demand for new iPhones has long been high, so the risk for Apple in offering a trade-in program is that flooding the market with older iPhones could possibly cannibalize sales of newer products that offer higher profit margins.

Associated Press (2011)

Demand for new iPhones has long been high, so the risk for Apple in offering a trade-in program is that flooding the market with older iPhones could possibly cannibalize sales of newer products that offer higher profit margins.

SAN FRANCISCO — Apple said Friday that it has launched an iPhone trade-in program at its U.S. retail locations. The program will allow consumers to trade older devices for credit on new products.

Apple confirmed the program to MarketWatch, but said it is not widely marketing the service. The new program comes ahead of the expected launch of new iPhone models next month that could include an updated version of the iPhone 5 as well as a cheaper model — though Apple has not confirmed any new iPhones in the works, keeping with its penchant for secrecy.

"IPhones hold great value. So, Apple Retail Stores are launching a new program to assist customers who wish to bring in their previous-generation iPhone for reuse or recycling," the company said in an emailed statement.

An Apple representative would not confirm the amount of trade-in credits that would be offered under the program. The amount will vary depending on device and its condition. The 9to5Mac blog said trade-in values would likely be in the $250 range for an iPhone 5 in good condition, with an iPhone 4 fetching $80 to $140, depending on type and condition.

Carriers like AT&T and Verizon have been offering their own smartphone trade-in programs over the summer, and Apple has been widely expected to follow suit, given that the company is now in intense competition with Samsung as growth in the high end of the smartphone market has slowed considerably.

Analysts believe a trade-in program can help Apple hold on to iPhone users, as older devices can be used to lock in customers with new devices for another two years.

The risk for Apple is that flooding the market with older iPhones could possibly cannibalize sales of newer products that offer higher profit margins.

Toni Sacconaghi of Bernstein wrote earlier this month that Apple could reduce this risk by speeding up the replacement cycle — or the rate at which people upgrade their iPhones. A trade-in program could help customers upgrade their devices more frequently, depending on the terms.

"Our analysis suggests that a decline in the average replacement cycle from (about) 2 years to (about) 1.8 years could fully offset the negative cannibalization impact from used phones to gross profit," Sacconaghi wrote in an Aug. 12 report.

Apple kicks off iPhone trade-in program 08/30/13 [Last modified: Friday, August 30, 2013 8:17pm]
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