A Booming Market for Used iPhones

Apple is expert at stoking desire, seducing consumers to line up and pay a premium for its newest models. At the moment, though, the hottest iPhones are less expensive—and old. Sales of refurbished iPhone 4’s and 4S’s are booming among price-conscious shoppers, especially in fast-growing emerging markets, and U.S. phone companies are racing to outdo one another with trade-in deals for customers willing to part with those models. In April, T-Mobile US launched a promotion that lets iPhone 4 and 4S owners swap for an iPhone 5 with no money down. AT&T countered that offer in mid-May, spotting iPhone 4S owners up to $200, its price for a 16-gigabyte iPhone 5.

The pan-Pacific cell phone trade is more than a decade old, but it’s only now becoming a big enough phenomenon to affect phonemakers’ futures. Boston-based reseller Gazelle expects to ship its millionth device this year from the U.S.—nearly half are sold to regional resellers based in Hong Kong—and its sales should double to more than $100 million, says Chief Executive Officer Israel Ganot. “The desire of consumers in the U.S. to stay current, combined with very high growth in emerging markets, is creating an incredible opportunity,” he says. “There’s truly insatiable demand in some of those markets.” Gazelle’s website offers about $210 for an iPhone 4S with 32 gigabytes of hard drive space, which typically sells for $450.