Chicago Tribune
By Gus G. Sentementes
You know that shiny smartphone you bought six months ago? There's an even better one hitting the market right about now. Or how about that flat-panel TV you bought last year? Now it comes in 3-D.
With the ever-quickening pace of technological advances, you can be left in the digital dust.
Retailers have a solution for consumers — and for themselves. They will buy back your old gadget in hopes that you turn around and purchase the next best gadget on their shelves.
Under these buyback programs, big-box retailers and online merchants give cash or credit for a piece of used electronics. Best Buy, the world's largest consumer electronics retailer, launched its program this year.
"Technology is changing so fast that the consumer a lot of times feels they're being left behind, so they'll postpone buying," said Cynthia Jasper, an expert in buying behavior and head of the consumer science department at the University of Wisconsin-Madison. "So it's a way to make the consumer feel at ease."
For retailers, buyback programs are another way to lure customers into stores to spend on pricey gadgets such as smartphones, laptops, tablet computers and televisions. Retailers also see buyback programs as an alternative revenue stream because they can sell used products through online outlet sites.
One California startup, ecoATM, has put its own twist on the concept in an automated kiosk that accepts used gadgets and pays the consumer in cash or gift cards. The company behind the Redbox movie rental kiosks, Coinstar Inc., has invested in ecoATM, which has deployed some of the machines in California.
Retail industry experts say the consumer electronics market is evolving the way markets in used cars or textbooks did. And if consumers believe their gadgets will retain some value, they might be more willing to upgrade sooner rather than risk the device becoming outdated and worthless, industry experts said.
For years, early adopters of gadgets have used eBay and other online outlets to sell their devices and used the cash to defray the cost of the latest models. With the new buyback programs, that kind of electronics consumerism could become the norm.
Many consumers already trade in, and up, their cell phones, as those who lock into contracts are often given credit to upgrade to newer models. Sprint, AT&T and Verizon have introduced their own buyback programs, some of which aim to lure customers from other carriers.
"The electronics business is built on people upgrading their products," said Stephen Baker, vice president of industry analysis at NPD Group, a technology research firm. "Anything to increase the turnover is a benefit to the industry."
Consumer electronics retailers typically have thin profit margins, but some are finding a lucrative market in buying and reselling lightly used gadgets.
Dale Rogers, a logistics and supply chain expert and a professor at Rutgers University, estimates that the secondary market for consumer electronics is worth about $13 billion in annual sales, or about 10 percent of the total consumer electronics market in the United States.
Rogers said that brick-and-mortar retailers increasingly feel threatened by online commerce and are strategizing ways to keep consumers coming through the doors. Best Buy's program, for one, requires customers to come into the store to sell back products.
"The brick-and-mortar, big-box retail store is experiencing some difficulty these days," Rogers said. "It's real easy to buy online, so these buyback programs are really a great way to get you into the store."
Under Best Buy's program, the consumer who buys a gadget pays an upfront fee, which varies on the type of product, to participate and is guaranteed a resale price of 10 percent to 50 percent of the item's original price. Most gadgets, except for TVs, have to be sold back within two years to qualify for a resale. Televisions have a four-year window for resale.
Best Buy then resells the products through its outlet center or other online channels, or recycles them. Best Buy officials say that with the fee, consumers are guaranteed a minimum return. The company also promotes the convenience of in-store resales as a key benefit.
TechForward, a startup company in California, has been offering this guaranteed-buyback model for several years, partnering with such clients as Radio Shack and CompUSA, which offer the option to consumers. The terms of TechForward's program are similar to Best Buy's. The two companies are in litigation over Best Buy's creation of its buyback program.
Some consumer advocates say there are other options for selling used electronics without paying an upfront fee.
Gazelle.com, a Boston-based company founded in 2006, gives consumers the going market price for a gadget, whether it's a smartphone or a tablet.
It also has developed its own technologies for quickly assessing the worldwide market for electronics. Gazelle users can get an online price quote for their equipment, ship the product for free to the company and get paid within two weeks.
Some of Gazelle's retail partners include Walmart, Costco and Kmart. Consumers can trade in electronics through these retailers' websites and get store credit, or they can opt for cash back.
Kristina Kennedy, a Gazelle spokeswoman, said the company calls the nascent industry "recommerce." The March 2 unveiling of Apple Inc.'s iPad 2 led to a watershed moment for the online service. Owners of the original iPad flocked to the website and sold 2,400 units on the day that Apple CEO Steve Jobs announced the second version.
"That became the biggest day of business for us in the company's history," Kennedy said.
"What's really spurred our business is the pace of innovation. The last couple years have seen some very exciting products to come out in consumer electronics."
