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Market growing for refurbished, used iPods

Posted by iNext - 2005-11-07

The popular iPod Nano and the just-released video iPod are expected to lead a surge of holiday sales for Apple Computer. Research firm Fulcrum Global Partners predicts Apple will sell 10 million iPods in the fourth quarter, a strong follow-up to the 7 million sold in the previous quarter. But not all of these sales will be to new iPod owners.
 
Piper Jaffray analysts say about 30 percent of the iPod purchasers are now repeat buyers who are either replacing an existing, earlier-generation iPod or adding to their range of styles (such as an iPod Shuffle and a video iPod).

If the average lifespan of an iPod is about 1.5 years, what happens to the older models?

Analysts say most users hand down their iPods to friends or family once they purchase a new one. Some simply throw them away.

Increasingly, however, consumers are capitalizing on the growing iPod phenomenon by selling their used iPods for cash or as a trade-in toward a new device.

And it is not just for bargain hunters, either. With the popular iPod Mini being discontinued, many fans have turned to the refurbished market to track down a favorite color in what is becoming a cult-nostalgia item.

"There is an emerging market for older iPods," Piper Jaffray analyst Gene Munster says. "Apple discontinues successful products that people feel some sort of connection to. They're the retro-cool thing."

COTTAGE INDUSTRY

Internet auction site eBay has literally thousands of iPod and iPod-related products for sale. The site is considered a leading resource for those seeking an inexpensive way to join the iPod revolution. So is Web site Craigslist.

With 28 million iPods sold worldwide, the potential for iPod refurbishment and sales has created a cottage industry of sorts.

Small Dog Electronics, for instance, is an established Apple reseller that has for years sold refurbished Macintosh computers and other accessories. The company now sells around 500 used and refurbished iPods per month from its Web-based store at significant discounts. A refurbished third-generation, 30GB iPod that cost $400 in 2003 now runs for about $210, for example.

The company offers up to $100 off the price of a new iPod to anyone trading in a used one. According to CEO Don Mayer, the pace of such replacements is expected to increase as iPod sales continue to grow.

"You have a curve that's getting larger every quarter for the installed base of iPods," he says, "so the used and refurbished ones are getting more and more prevalent. All that increases with volume."

Another company, PodSwap, takes it a step further by not only offering cash for used iPods but also shipping players loaded with music that has been authorized for such distribution by artists who own the necessary rights.

Both companies collect the used devices, determine and classify their condition, make whatever repairs are necessary and then clear the memory of any music files before shipping.

COLLECTIONS FOR SALE

It is a bit more loose on Craigslist and eBay. Several iPods up for auction include the sellers' music collection and instructions on how to transfer the music from the iPod to the buyer's computer. Some even take requests for additional songs to be added prior to shipping.

One video iPod for sale contains an entire season of TV show "King of Queens" included.

Even Apple competitors have tried to use the swap as a promotional tool. Dell offered a $100 mail-in rebate to any customer turning in an old iPod when buying one of its MP3 players.

Interestingly, all the deals are better than what Apple itself offers. The company began offering iPod owners a 10 percent discount on new iPods when they trade in an older device. That translates to anywhere from $45 off a 60GB video iPod to $10 off the iPod Shuffle.



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