IPhone 5 creates upgrade frenzy

Electronics resellers are seeing a surge of activity in anticipation of Tuesday's launch.

By TheStreet Staff Oct 3, 2011 11:16AM

the streetBy Olivia Oran, TheStreet


Weeks before Apple's (AAPL) iPhone 5 was rumored to be announced, Josh Kwolinski was already prepared.


The student and part-time AT&T (T) employee from Sacramento, Calif., had traded in his iPhone 4 to an online reseller called Gazelle, which offered him $300. He plans to use the funds to purchase Apple's fifth generation smartphone after its launch on Oct. 4.


"I'm an Apple nerd," Zwolinski said. "I deal with phones all day every day and constantly see problems with other phones, but not the iPhone."


Kwolinski is just one of thousands looking to trade in their smartphones in anticipation of the iPhone 5 release.


The device, expected to be a lighter, slimmer version of its predecessor with a better camera and faster processor, has created a frenzy among consumers who are ditching their old phones in droves.


Gazelle, a consumer electronics reseller in Boston, has seen a 20% increase in smartphone trade-ins across all platforms in the past three weeks, when rumors about the iPhone 5 launch date started circulating.


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Used iPhones have gained the most traction, said Gazelle's chief gadget officer, Anthony Scarsella, who has seen trade-ins double within the past two weeks.


In the past week alone, about 4,500 people tried to sell their iPhones, up nearly 30% from the prior week. And after press invites for the iPhone 5 launch event in Cupertino, Calif., started circulating across the Web, one iPhone was being traded in on Gazelle every 10 seconds.


"It's been a lot more aggressive this time than when the iPhone 4 launched," he said. "There's been more hype around the phone since it got delayed."


Gazelle predicts more than 20,000 people will try to sell their used phones on the site after the iPhone 5's launch -- more than 10 times what it saw with the iPhone 4.


Gazelle, which pays consumers about $170 for a 32GB iPhone 4 in good condition, is just one of several sites looking to help consumers sell their unwanted electronics like phones, digital cameras and laptops. Smaller companies like NextWorth and ReCellular have joined the fray, while giants like eBay (EBAY), RadioShack (RSH) and GameStop (GME) have also launched trade-in programs.


They're all hoping to capitalize on the multibillion-dollar used-electronics space that has consumers scrambling to ditch their old gadgets as quickly as possible for newer and shinier products.


This mad rush has resounded with the iPhone in particular, which has seen a surge of people looking to replace their phones even before their contracts are up.


"Apple has the most demand from phones off the upgrade cycle because of the brand they've built and its ability to resonate with consumers," said James Ragan, an analyst with Crowell, Weedon & Co. "The early adopters just need to have something."


According to a recent study by mobile ad network InMobi, 41% of mobile users in North America plan to buy an iPhone 5. That figure includes more than half of current iPhone customers.


To accommodate the swell in demand, Gazelle two weeks ago rolled out a so-called "red carpet" experience for customers to sell their iPhones, which includes a mobile app, a special iPhone processing team and a concierge customer-care group answering questions about SIM card removal and hacking.


Once customers receive a quote for the items they're looking to sell, they'll get a free shipping label from Gazelle. After Gazelle receives the item, the gadget is inspected and personal data deleted. The company aims to send a check to consumers within a week. It then resells the items on marketplaces such as Amazon (AMZN) and eBay, as well as through wholesale partners.


Sites like Gazelle make swapping phones easier -- and safer -- than ever for consumers who might ordinarily turn to unmonitored marketplaces like Craigslist, Scarsella said.


"In the past, you'd have to know how to list your products, wait to get paid and go meet some random guy somewhere," he said. "It's not secure, not safe and not fast."


In a sign of confidence in the sector, Gazelle announced a $22 million funding round in July.

"Tech product cycles for years have been getting shorter and shorter and carrying the latest and greatest gadgets is a status symbol," said Mike Tyrell, a partner with Venrock Associates and a member of Gazelle's board of directors. "We're trying to make trading in an old iPhone to get an iPhone 5 Netflix (NFLX)-simple."

Oct 3, 2011 4:00PM

According to a recent study by mobile ad network InMobi, 41% of mobile users in North America plan to buy an iPhone 5. That figure includes more than half of current iPhone customers.

I wonder how many of that 41% are

  1. Living paycheck to paycheck (~50-75% of Americans depending on source)
  2. Underwater on their mortgage (~25% of Americans with mortgages)
  3. Have no money in emergency funds (~25%)
  4. Have no retirement funds (~34%)
  5. Have enough debt to choke a horse (??%)

I know, I know...   you just gotta have the latest iPhone to make you complete while you bitch and complain about the government not spending its money wisely.


Oct 3, 2011 1:01PM
OMG! It's TOTALLY lighter and it like, moves a little quicker and stuff and has a camera that many other phones have already had for a year! Sell the house! We need it! It has an APPLE emblem on it...
Oct 3, 2011 12:59PM
"I'm an Apple nerd," Zwolinski said. "I deal with phones all day every day and constantly see problems with other phones, but not the iPhone."

Typical fanboy lol.
Oct 3, 2011 1:30PM
In other news, sheep go "Baaaaaa"..........
Oct 3, 2011 2:59PM

Gotta agree with a lot of posts on here.  Is the Iphone 3g/3gs and 4g really bad enough that you just have to jump outta your shoes to get the new 5.  I have had an older 3g now for 3 years and I will continue to use it until there is actually and advancement to the technology that really warrants a $500 dollar upgrade. 

Lets see my old 3g,

Takes pictures fine.  I cannot even tell between the small upgrades in megapixels anymore and if I want professional grade photos i'll probably use my Canon SLR.

Texts and sends pictures fine.

Calls and receives fine.  Could have slightly louder volume.

I have no need for 250,000 aps of which most just consume time and are a waste of data space. 

Oh yeah and I have mine unlocked for T-mobile so I am not subjected to At&t's crap.  All other things I need work just fine on my wifes Samsung Galaxy S 4g which I got used for less than $200.


Oct 3, 2011 12:30PM
I surely wish i would have thought about this to make my million Wink
Oct 3, 2011 2:54PM
I am slightly annoyed with Apples "milking" me ... I have spent several thousands on iphones, ipods, macbooks etc... only to find them becoming obsolete in 6 to 12 months, c'mon!!! They should have an upgrade policy that rewards the loyalty ... ATT however holds us hostage on the plans and of the 5 members of the family/staff of the company only one can upgrade...??? Stinks!
Oct 3, 2011 1:22PM
Interesting.... In the second paragraph Gazelle offers him 300.00. A few paragraphs later he states that Gazelle pays 170.00 for a 32GB Iphone 4.... Flawed math?
Oct 3, 2011 1:34PM

I can see the future of humanity now...........iPhone 57869405 will be out out at 9am; 57869506 comes out at 9:05am, 57869507 at 9:07:30 and so on down to when until all time warps into the same microsecond and ..............ceases to exist.


Count on it.

Oct 3, 2011 2:41PM
I love my 3GS. I never upgraded to a 4 and probably won't upgrade to a 5 because they're too damn expensive. The phones are great, but you can get that same thing from another manufacturer for way less money. Granted, iOS is much better the Windows Mobile (which is the worst POS ever), and better then Android, but still. Just like with their computers Apple is way overpriced. I'll keep my 3GS until it dies, then probably buy a used iPhone 4 on eBay, just like I did with the 3GS.
Oct 3, 2011 3:01PM
I really love my iPhone. I had an ipod touch for years but saw no reason to buy the iPhone, boy was I wrong. No more searching for a wi-fi spot now!
Oct 3, 2011 3:00PM

My wife has just sold her I-phone 4 to buy the 5. I dont konw why. She has been through 5 I-phones (3 of the originals and 2 4's) They do not appear to be very reliable.

Oct 3, 2011 3:43PM

Never thought i'd have a need for one.  My laptop and blackberry combo was just fine.


Then I got a new job and they bought one for me instead of a blackberry.  I am in love.  iPhone, where have you been all my life?  :)

Oct 3, 2011 2:46PM

Hmm.  iLOVE the way that Apple sheeple iTHINK.


"I deal with phones every day and see problems with other phones, but not the iphone."


Then why in the heck are you iUPGRADING the instant the new one comes out?  If there is nothing iWRONG with your iPHONE 4, then you have no iREASON to iLIE to yourself and upgrade.  The only reason you iUPGRADE is because there is an iPROBLEM with your iPHONE.


The new phone is faster?  Then that means your current phone is too iSLOW for your taste.. That would be described as a problem.


The new phone is a better camera? Then that means your current camera is too iBAD for your taste.  That would be described as a problem.


Stop iLYING to yourself and admit.  The problem is the iSHEEPLE who are bowing and worshiping the great iAPPLE by giving them their money everytime iAPPLE says "here is your new technology.  Pay us now, please."


Maybe I need to come up with a new white-colored version of iKOOLAID for these people to drink.  I'll change it every week and tell them it is an "upgrade."


*shakes head*


Oct 3, 2011 5:03PM
If iPhones are so bad why is my 3G still the best thing since sliced bread?
Oct 3, 2011 2:19PM
I love my iphone 4 and can't wait for iphone 5.  All the complaints of breakage, buy an otter box!  my hubby dropped his from a 2nd story ladder a year ago and is still working fine.  My iphones have lasted by far the longest since the old "bag" phones
Oct 3, 2011 4:59PM
story lost all validity,when he said other phones had issues and the iphone didn't.....really.really
Oct 3, 2011 2:06PM
When Apple comes out with the REAL iPhone 5 I will buy one, until then my 3G works just fine... take your time Apple, no big rush....

I'll bet my Android bionic will still kick its butt, at work the i phone cant get any reception through the walls and my phone does, it may work well but not when it doesn't work at all.

Oct 3, 2011 3:09PM

Wow...people are REALLY excited for this new iphone thing........




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