Apple IPad 2 Lines Led by Gray Marketers Eager to Resell Devices Abroad
Apple IPad 2 Lines Led by Gray Marketers Eager to Resell
David Paul Morris/Bloomberg
People wait in line outside the Apple Inc. store for Apple's iPad 2 to go on sale, in San Francisco.
People wait in line outside the Apple Inc. store for Apple's iPad 2 to go on sale, in San Francisco. Photographer: David Paul Morris/Bloomberg
March 11 (Bloomberg) -- When Apple Inc. releases a product, the store lines are typically led by fanboys clamoring to be first with the latest gadget. At the downtown San Francisco store for the iPad 2 debut, the gray market got there first. Dennis Ng, Kurt Collins and Brian Williams talk with Bloomberg's Adam Satariano in the Apple store line. (Source: Bloomberg)
Apple IPad 2 Lines Led by Gray Marketers Eager to Resell
David Paul Morris/Bloomberg
James Almeida is the first to wait in line outside the Apple Inc. store for Apple's iPad 2 to go on sale, in San Francisco.
James Almeida is the first to wait in line outside the Apple Inc. store for Apple's iPad 2 to go on sale, in San Francisco. Photographer: David Paul Morris/Bloomberg
When Apple Inc. (AAPL) releases a product, the store lines are typically led by fanboys clamoring to be first with the latest gadget. At the downtown San Francisco store for the iPad 2 debut, the gray market got there first.
Dennis Ng, 20, said he was being paid $10 an hour to arrive before 5 a.m. on the day Apple began selling the device at its stores. He said he was in a group of about 35 mostly Chinese immigrants at the front of the line, waiting to buy the iPad for somebody else. Resales of new electronics in countries where they’re not yet available feed the so-called gray market.
“I’m here waiting in line because I want to make some money,” said Ng, who lives in San Francisco and works at a clothing store. He wouldn’t identify who hired him. “Many of the Chinese immigrants you see here need work and money so they go through this associate group for side jobs and this is one we found.”
The iPad 2 debuted yesterday in the U.S. and it will be released in 26 other countries on March 25. Nations like China and Russia have to wait even longer, creating a market for people to import the device and resell it. According to a July estimate by Flora Wu, a handset analyst at BDA China Ltd., gray- market purchases accounted for almost half the iPhones sold in China. BDA came up with the estimate prior to the release of the iPhone 4 and the iPad in China.
The demand is changing the vibe at the front of the line. At the iPhone debut in 2007, those in line watched Star Wars,” smoked cigars and got a surprise visit from Apple co-founder Steve Wozniak, said Kurt Collins, a self-described technology enthusiast. He said the people in line created a “community.”
Sense of Community
“This one is very much not that kind of community feeling,” said Collins, who was in line behind Ng’s group. “Normally you see a lot of tech enthusiasts and first adopters.”
Apple Chief Executive Officer Steve Jobs has taken steps to rein in the gray market, including limits on purchases to two iPads per person. During the debut of the original iPad, Apple only accepted credit cards or debit cards to pay for new gadgets. It later stopped that policy to accept cash.
Amy Bessette, a spokeswoman for Apple, didn’t respond to requests for comment.
The iPad 2 has a faster processor that speeds up performance and improves graphics quality, and front and rear cameras that allow for videoconferencing. It’s also 15 percent lighter and 33 percent thinner than the previous model.
Prices are the same as for the original, starting at $499 for a base model with 16 gigabytes of memory.
‘Gazillionaire’ Buyer
Analysts at Gleacher & Co., Piper Jaffray & Co. and Rodman & Renshaw LLC are among those predicting the iPad 2 will outsell the original. Brian Marshall, a San Francisco-based analyst for Gleacher, estimated sales of 600,000 tablets this weekend alone. The first iPad, which came out last April, generated $9.6 billion in sales of 14.8 million units through December.
At some stores, people have taken steps to work within the purchase rules. Esteban Kelly, a 19-year-old student at the College of San Mateo, and seven of his friends, were being paid $100 each to buy 16 iPads at the Burlingame, California, store. The buyer: someone Kelly described as a “gazillionaire.”
“My income’s tight right now,” Kelly said, when asked why he was willing to wait 20 hours in line at a pay rate of about $5 an hour.
Brian Williams, a high school teacher in San Lorenzo, California, said it’s a simple matter of supply and demand.
“I’m an economics teacher,” said Williams, who lined up at the downtown San Francisco store. “If there are people who don’t want to stand in line, and they are happy to pay for that service, then there are people who are going to do it.”
To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Marc Perrier in San Francisco at mperrier@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.
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