Instant Competition For Apple's iPhone Trade-In Program

In a talk with Apple retail's leadership team in July, CEO Tim Cook outlined his goal to bring more visitors into the stores and increase the percentage of iPhones sold through the company's own chain. Among the methods Cook mentioned to accomplish that goal was a new trade-in program that on Monday tipsters said will begin within days. Not coincidentally, on the same day trade-in company Gazelle announced an enhanced offer aimed squarely at the reported September 20th debut of the newest iPhone 5. [I'm an Apple stockholder.]

Trading in an iPhone for cash has been successful venture for several companies, notably Gazelle, which began paying money for all sorts of electronics in 2007. Since then the company has narrowed its focus to mostly Apple products, along with other brands of tablets and cellular phones. The company is particularly busy during the annual iPhone new model season, although they purchase iPhones throughout the year.

Apple, perhaps mired in agreements and contracts with cellular carriers, has never had an iPhone trade-in program.

Gazelle's purchase process is simple for an iPhone: Specify your model, memory and carrier on-line, then chose its condition: broken, good or flawless. Gazelle immediately displays their purchase offer. If you accept the offer they'll mail you a box. When they receive and confirm your iPhone's condition, you're paid by check, PayPal or Amazon gift card.

Earlier this year Apple decided to join the iPhone trade-in market. In fact, on Monday insiders reported that some Apple stores have alerady been testing the program at select stores. Training for the chain-wide roll-out of trade-ins is about to begin, the reports say.

Details are slim on exactly how Apple's program will work, only that it will be in conjunction with Brightstar . But it seems that unlike Gazelle's program, Apple will only be offering you credit towards the purchase of a new iPhone, not cash. And reportedly, you can only use the credit if you're eligible for an iPhone upgrade from a cellular carrier.

The trade-in values for Apple's program haven't been revealed. But speculation seems to tie the trade-in value to the cost of an upgraded iPhone, instead of the true value of the handset on the used market. And the difference is huge. For example, speculation is that Apple will offer you $250 credit for a 16 Gb iPhone 5, while Gazelle will pay you $315 for the same device in good condition.

But Gazelle isn't competing only on the amount they'll pay you. On Monday they announced one more reason to sell them your iPhone. They will buy back your iPhone now, but you won't have to actually ship it to them until October 15th. That will let you lock in a relative high, pre-intro market price for your iPhone now, and you can then take your time to purchase the new model that reportedly debuts September 20th, transfer your data to the new handset and send in your old iPhone.

Buyback and trade-in programs are driven entirely by speadsheet numbers. Gazelle seems to be using a dataset that gives them a profit at $315, while Apple can only offer $250. Based on the value difference, it seems Gazelle is much closer to a sales market than Apple, which is probably having to share its trade-in money with Brightstar and maybe even the carriers.

Steve Jobs often referred to the marketplace as deciding winners and losers among technology companies. In this case, perhaps the company with the best trade-in offer will attract the most customers. And it may not be Apple's retail stores.

[Gazelle's receiving deadline was corrected in this story.]