Smartphones have strong trade-in value, sometimes as much as hundreds of dollars.
In July, the trade-in value of a 16 GB Apple iPhone 4S on AT&T's network ranged from $150 to $275, depending on whether the party buying the device was a carrier, retailer or manufacturer, according to NPD Group.
That means an average consumer might use the amount a carrier or other party is offering for a smartphone trade-in to shop around to get more dollars from a different carrier. In other words, the consumer might have some modicum of power in an obviously organized and aggressive smartphone resale market.
At least, that's one theory of the how the smartphone trade-in market works—it assumes that the next carrier offers good network connections and prices for voice and data, at least as good as the current one.
As no-contract wireless service plans begin to emerge from U.S. carriers, there appears to be a booming interest in trade-ins, according to a poll released Monday by NPD Group.
Customers plan trade-ins
Of 1000 smartphone users polled, 55 percent plan to take advantage of a trade-in with their next upgrade. That's a big increase from the 13 percent of respondents who said they traded in their last smartphone.
"The trade-in concept is gaining consumer traction rapidly," said Eddie Hold, an NPD analyst.
About 30 percent of respondents said they are willing to switch carriers to get a better trade-in value, while more than 60 percent said they are willing to change retailers like Best Buy or Walmart to get a better trade-in value, even if they stick with the underlying carrier.
A sudden increase in trade-ins could be a boon for retailers and smartphone makers, and a potential threat to carriers, Hold said in an interview. "The carrier grasp of the smartphone consumer could become more tenuous," he wrote in a new blog post.
To prevent customers from leaving their ranks to join another carrier and to help lessen the impact of trade-ins, loyalty plans from T-Mobile, AT&T and Verizon Wireless called Jump, Next and Edge, respectively, have recently been launched, Hold said.
All three plans eliminate long-term service contracts, although they still require paying off a sizeable portion of the phone's full value before being able to trade up to a new device with the same carrier.
"Every carrier wants to keep every single customer, and they want to get at more of the other carrier's customers," Hold said. It's too early to judge the impact of the loyalty programs, he added, but they seem to have contributed to the already-growing interest in getting top value for a smartphone trade-in.
Hold said that while the poll results indicate a strong interest in trade-ins, it's possible that when the time comes, customers will simply jump at the first deal without shopping around.
Getting full value for a trade-in on a smartphone is definitely more complex than with trading in a car, he said.
"Nothing in the mobile world is simple and trading in a smartphone is definitely complicated," Hold said. "There's no Kelley Blue Book for standard pricing and how valuable your phone will be. Some people will shop around for the best trade-in deal and others will take the first deal."
Smart carriers will realize the need to quickly react when their trade-in values are leading to lost customers, he predicted. The terms of the new loyalty programs are intended to slow down the urge to jump to another carrier.
"Trade-ins are very concerning for carriers, and it's added a whole new metric," Hold said. "Our older flip phones had almost no value, but now we are all starting to realize smartphones have a lot of value."
NPD found the average price for a trade-in of an iPhone 4S 16 GB with AT&T was $216 in July, with Best Buy and RadioShack offering the least at $150, with Amazon the most at $275. The prices listed by the four major carriers ranged from $155 to $225, while Nokia, Samsung and HTC all offered above-average trade-in values for the iPhone 4S as long as the new device was one of theirs.
NPD also found the average price for the same 16GB iPhone 4S on Verizon was $165 in July, while a Nokia Lumia 900 on AT&T got an average trade-in of $56 and a Samsung Galaxy S III 16 GB on AT&T got $158 and on Verizon got $155.
This story, "Smartphone resale market begins to emerge" was originally published by Computerworld.