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New Research Reveals Why Apple Is Entering the Smartphone Trade-In Market (AAPL)

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New Research Reveals Why Apple Is Entering the Smartphone Trade-In Market AAPL

According to a new report, if you’re in the smartphone business and you’re not offering a trade-in program, you’re probably losing business or not gaining new customers.

That’s probably why Apple (NASDAQ: AAPL) is reportedly planning to get into the smartphone trade-in business.

The study, titled "Trade In, Trade Up, Trade Out," surveyed 1,000 smartphone users in July. It found that 55 percent of respondents said they would trade in their old phone when it came time to upgrade. Sixty percent said they would consider the value of a retailer’s trade-in program when choosing their next carrier.

This study proved that these programs represent significant value to customers, and that’s why the major carriers, including AT&T (NYSE: T), Verizon (NYSE: VZ), and T-Mobile (NYSE: TMUS) have each not only embraced trade-ins, but recently revamped the programs to allow customers to upgrade sooner for a monthly fee.

An iPhone 4S, for example, has a trade-in value of around $200, with Amazon.com (NASDAQ: AMZN) offering as much $300 for the 16 MB model.

Apple is reportedly getting into the trade-in program as well. According to Bloomberg, Apple will partner with Brightstar Corp., the same company that runs trade-in programs for AT&T and T-Mobile, to offer it to customers at its retail locations. Customers who bring their old iPhone to an Apple store will receive cash.

Read: Obama Administration Surprises By Overturning Apple ITC Ruling

Why does a high-end company like Apple want to be in the second-hand business? Because it’s profitable. The company will be able to profit from a growing demand for unsubsidized phones that are preferred by consumers in markets outside of North America.

There might be another reason. According to AppleInsider, less than 15 percent of iPhones sold in the U.S. come from an Apple retail store and CEO Tim Cook doesn’t like that. Implementing a trade-in program could help to draw more customers in to the store to purchase a phone directly from Apple, especially if the trade-in program were just as good or better than those of the carriers.

Along with the rumored trade-in program, a new version of the Apple Store iPhone app alerts customers when they are eligible for an iPhone upgrade. It’s clear that Apple is stepping up its efforts to capture more direct sales of its mobile devices.

Disclosure: At the time of this writing, Tim Parker was long Apple.

 

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