Looming Galaxy S IV Launch Spurs Spike in Smartphone Trade-Ins

CExchange measures new phone interest by consumer inquiries on the trade-in value of their phones, and in the case of the Galaxy S IV, “for an Android device, it’s pretty shocking,” Kilinski said. Galaxy smartphones are the only other manufacturer-specific category CExchange tracks independently because of their volume, Kilinski said. All other Android phones are lumped together in one group. Kilinski wouldn’t disclose the number of appraisals that Galaxy phones have tallied since news of the upcoming Galaxy IV hit, but he said it was in the “high seven digits in a short period of time."

There has been “more interest from Apple users in this launch” than when other Galaxy devices launched, he said, underscoring the fierce loyalty of iPhone users. But iPhone owner trade-in interest is only about 25 percent of the interest shown by Android users, he said. “I wouldn’t predict they're going to shift a ton of Apple users over to the S IV, but they're going to take some,” he said. Most of the interest is coming from second- and third-gen Galaxy users, he said.

On trade-ins, CExchange offers two options through its 40-plus retail partners -- including RadioShack, Walmart, BrandsMart, eBay’s instant sale program and U.S. Cellular -- based on whether a phone is re-usable. If the device powers on, doesn’t have cracks in the screen and there’s no sign of liquid, it is deemed “working,” Kilinski said. If it doesn’t meet those criteria, it’s labeled “not working” and consumers are offered a lower price for trade-in, he said.

Currently, trade-in price for the most recent Galaxy smartphone, the S III, is about $200, which is what users paid typically paid at the outset with a two-year contract, Kilinski said. When a new phone launches, prices are often guaranteed through the launch period as part of a retail promotion that lasts several weeks, Kilinski said. The trade-in value for a usable phone could “fluctuate wildly” in the weeks up to launch, but CExchange forecasts in those changes well in advance of a prominent phone’s on-sale date, he said. “You typically see a 30 percent drop in value” when the product is officially released,” he said. Customers should “trade quickly and trade early because it doesn’t get any better after that,” he said.

Some online retailers allow users to lock in a price for 30 days in advance of getting a phone, he noted, but there’s no guarantee the online retailer will agree to the value that a user has set for his own phone. “When you ship to someone online and they have multiple variables, you can lock in a price all day long but that doesn’t mean you're going to get that price,” he said. “That’s a challenge in the business,” he said. In a physical store under CExchange’s program where an employee inspects the condition of a phone, “you know you're going to get that value,” he said.

Most of the devices CExchange deals with can be resold, Kilinski said, with “a few” that have no value because they were dropped or have water damage, he said. He estimated that more than 90 percent of Samsung S III devices are resellable products. “Re-use is a big deal, and they do get re-used,” he said.

Best Buy is not part of the CExchange program, and we found 22 Galaxy III devices listed at Best Buy’s online trade-in section Thursday. The AT&T Galaxy S III 65250 model in marble white had a trade-in value of $315 for perfect, $300 for good, $135 for poor and $0 for broken. A disclaimer read “Actual trade in will vary according to actual condition and completeness of peripheral accessories.” Customers can turn in the phones in store or mail them in, Best Buy said, and will receive a Best Buy gift card for the value. Best Buy offers contract phone buyers a “Trade-In Plus” option on in-store purchases, in which they receive a gift card worth the phone’s trade-in value plus an additional $50 “when you're ready to upgrade.” The fine print says the “plus” option is free with purchase of a Geek Squad protection plan or $29.99 if purchased separately.

Electronics re-sale site Gazelle showed trade-in cash prices for the Galaxy S III Thursday of $226 for “flawless” and $200 for “normal.” The Galaxy S III was selling on eBay Thursday through Best Buy Mobile Solutions for $99 with a two-year AT&T contract with $325 termination fee; for $149 on T-Mobile with two-year contract and $350 termination fee and $99 for a 16GB model from Verizon with two-year contract and $350 cancellation fee. Auction deals on eBay Thursday afternoon for the S III included a “new in the box” titanium 16GB Galaxy S III that had five bids from $460-$500 with 12 minutes to go, while a pebble blue model that had been “opened and charged once” fielded 18 bids from $200-$360 with one hour to go.

Despite reports warning of slowing growth in the smartphone market as penetration expands, Kilinski said upgrade cycles keep narrowing. The most recent average ownership period for smartphones before an upgrade to a newer device was 14 months, even for consumers with a two-year contract. “Trade-in allows you to do things you wouldn’t normally do,” Kilinski said. He gave the example of buying the S III on a two-year contract with a $350 early-termination fee. “If I wanted to leave AT&T, after three weeks, I could sell the phone for more than my early-termination and get out,” he said. Or, if he kept it for 13 months, and paid a $200 upgrade fee, he could move up to the next device and “still get $200 for the old device by trading it,” he said. “I'll still have to pay $199 for the new product, but I can wipe out that early upgrade penalty easily with my trade,” he said. He doesn’t see the “pace of technology change and of competition letting up any time soon.”

Phones through CExchange’s program that aren’t resellable are sent to ECS Refining in Carroll, Texas, a long-time e-Stewards recycler, Kilinski said. “They reclaim everything possible and no e-waste whatsoever ends up offshore or in a landfill,” he said. CExchange sells the refurbished phones it accepts from retailers directly through E-Bay or Amazon, he said.