A new study by Consumer Intelligence Research Partners (CIRP) has found that 49% of the phones gifted or sold by those who upgraded to the iPhone 4S were previous iPhone models. The market of used iPhones makes a significant positive impact on Apple and its carriers.
For many users, smartphones are not anything new. A sizable number of upgraders are moving to the second, third, or even fourth smartphone. Consumer Intelligence Research Partners has found, for example, that 53% of those who upgraded to the iPhone 4S introduced their old phones into a “secondary market,” where used phones are bought, sold, and gifted. Of those, 49% were iPhones, 21% BlackBerrys, and 15% Android phones.
AllThingsD reports why there is such a large proportion of iPhones in that mix.
“We think the secondary market for the iPhone is more established, since iPhone has the longest track record for a single device/platform, and for many it is the aspirational entry-point smartphone,” CIRP co-founder Mike Levin told AllThingsD.
AllThingsD points out, 87% of upgraders expected their old iPhones to be activated for use with a US carrier. Based on that expectation, CIRP estimates that 11% of activations since the debut of the iPhone 4S were for older iPhones. These activations are also why there are occasionally differences in the number of phones sold and the number of activations performed at product launches.
This is definitely good news for carriers. Older iPhones which are re-activated on their network are cheaper from a Carriers point of view as they don’t need to subsidize the phone. CIRP estimates that carriers save $400 for each used iPhone activated, which amounts to about $400-800 million in Q4 2011 for AT&T and Verizon.
For Apple, there’s a bit of a mixed bag. Old and used iPhones compete with sales of newer models, which hurts Apple’s sales figures. But, they also help bring new people into the smartphone market, those who might not want to spend money on a new phone, or who are not up for contract renewal. These new entrants are more likely to spend money in Apple’s ecosystem, buying apps and music and so providing income to Apple that may otherwise not happen.
“Secondary-market iPhone owners are new content and app consumers,” said Levin. “We don’t know if these customers have the same budget for content compared to new iPhone customers, but reactivated iPhones will more likely consume content and download apps than forgotten old phones left in drawers.”
Secondly, owners of older iPhones are more likely to upgrade to the next generation iPhone model once they’re able to. Used iPhones give people exposure to Apple’s market as well as lead to new sales in the long-run, which proves to be more beneficial than detrimental for Apple. Combined with the fewer subsidies that carriers pay and the fact that more consumers can upgrade for less, it seems that the secondary market for iPhones is a win for everyone involved.