Robust Market for Used iPhones Benefits Users, Carriers, and Apple

AllThingsD reports on new research from Consumer Intelligence Research Partners (CIRP) analyzing the impact of the secondary market for the iPhone, the portion of used iPhones that are resold or given away when users upgrade to the latest models. The survey looked at customers purchasing new iPhones beginning with the iPhone 4S launch last October, finding that 53% of those users had returned their old phones to the secondary market.

Of those old phones being put back onto the secondary market, the survey found that 49% were older iPhones, while 21% were BlackBerry smartphones and 15% were Android devices. Approximately two-thirds of those devices returned to the market were given away, with the remaining third having been sold.

Breakdown of old devices reentering secondary market following new iPhone purchases
According to the survey, 87% of those who sold or gave away their old iPhones expected the recipients to activate them for use, which CIRP estimates as representing 11% of carrier activations since last October. That number represents a boon for carriers, who do not have to pay subsidies to Apple on the used devices.

The research firm believes that, for every used iPhone that carriers activate, they save around $400. In the fourth quarter of 2011 alone, CIRP figures that secondary-market activations saved AT&T and Verizon between $400 million and $800 million in subsidy costs.

And while the strong market for used iPhones may seem like a detriment to Apple given that those users may be purchasing a used device offering no revenue for Apple rather than a new one, CIRP suggests that those low-priced used handsets are a common way to introduce new users to the iPhone ecosystem. That introduction then sets the users up for future purchases of new iPhones and other Apple products.

“It hurts Apple because it creates competition for new iPhones, which we see in the relatively modest sales of reduced-price iPhone 4 and free iPhone 3G units. But it also benefits the company because used iPhone customers aspire to own the newest and best iPhone, so they are likely future new phone customers. In fact, they are likely new entrants to the Apple ecosystem, who otherwise would not have found a way in.”

Beyond future hardware sales, the used iPhone market also increases the user base and market for apps and other iTunes Store content, with the device's able to serve more good than if they had been discarded or forgotten in a drawer.