By Sarah Krouse
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 9, 2019).
Wireless carriers have long made smartphones look cheaper to
consumers by subsidizing their cost. Now Apple Inc. is trying to
woo phone buyers, offsetting the price of devices with generous
trade-in offers.
The company has rolled out at least one new iPhone in each of
the last several years, adding features that have pushed the
starting price of its top-of-line model above $1,000. With less
fanfare, Apple has also let U.S. customers trade in older models
for credit -- a program it is now hoping will help mitigate the
sticker shock.
Apple, which rarely discounts its products, has recently used
the trade-in program to incentivize purchases, sweetening offers
late last year with an additional $100 credit. The company also has
been more aggressive in its marketing of the program, promoting the
iPhone XR on its website and in emails to customers at a price of
$449 with trade-in of an older phone rather than at its starting
retail price of $749.
Apple Chief Executive Tim Cook said last week that making it
easier for iPhone customers to trade in their phones directly with
the technology giant and more easily transfer their data to new
devices were part of its efforts sell more smartphones after slower
sales in China and elsewhere led to a rare cut to the company's
quarterly revenue forecast.
Apple often gives consumers more for their old iPhones than the
four major U.S. wireless carriers, according to a Wall Street
Journal analysis of estimated monthly trade-in value data from HYLA
Mobile Inc., particularly older models. Hyla works with telecom
companies and big-box stores on such programs.
With the iPhone 6, for example, Apple has offered a higher
trade-in value than Verizon Communications Inc., AT&T Inc.,
Sprint Corp. and T-Mobile US Inc. in most months between September
2015 and the end of 2018, the most recent Hyla data show. For the
iPhone SE, Apple has offered a higher trade-in value than all four
major carriers each month since October 2016. Offers fluctuate by
model and storage space.
To date, however, that trade-in pricing edge hasn't been large
or well-enough known to consumers to stop an iPhone sales
slowdown.
Trade-in programs face some headwinds from customers who aren't
swayed by the discount, pass along old devices to other family
members or see upgrades as a hassle when their phone continues to
function well.
Beth Cole, a real-estate agent in Palm Beach, Fla., upgraded her
iPhone 5s to an iPhone 8 Plus late last year. Ms. Cole said she had
problems transferring all of her contacts to the new phone and
spent several hours at Verizon and Apple stores to resolve the
issue.
"I'm going to have this 8 Plus until I die," she said.
Device makers like Apple have been hurt in recent years by
changes to the structure of wireless phone contracts. Carriers have
offered less-generous promotions and separated the cost of a phone
from a customer's monthly service fees, leading to the demise of
the two-year ritual of upgrading devices and service contracts
simultaneously.
That change has made it easier for carriers to hold onto
customers, but tougher for device makers because many consumers
would rather stick with their old phones and enjoy lower monthly
expenses once their devices are paid off.
Apple customers keep their iPhones even longer than other
smartphone owners, according to Hyla. While consumers waited an
average of 2.83 years to upgrade in the third quarter, iPhones
traded in during the period were an average of 2.92 years old.
Apple's trade-in and recycling program began as an online-only
option in 2011 and has since evolved into what is now called Apple
GiveBack in stores or on the web. It now offers trade-in credit for
Apple's own products and rival devices in addition to the recycling
option for phones not eligible for credit.
"Why not put it toward a new iPhone?," an online message says
after spitting out an estimated trade-in value for a rival device
based on responses to questions about its make and quality.
Attractive trade-in offers give phone sellers a boost beyond the
device sale. Winning a purchase from a customer looking to trade in
a phone means Apple sits at the center of the consumer
relationship, rather than a carrier, getting an advantage on sales
of accessories and insurance.
That can keep customers from going to their carrier's retail
store, where sales associates have an opportunity to re-up their
contracts.
Still, the majority of new devices -- about three-quarters --
are currently bought through carriers, said Biju Nair, chief
executive of Hyla. He estimates that 62% of every trade-in dollar
is spent in store on either devices, chargers, cases or other
accessories and services.
Bill Hampton, 72, upgraded from an iPhone SE to an iPhone X
through his employer in December and said that while he enjoys the
new phone's faster performance and better speakers, he kept his old
device because the trade-in value on offer was limited.
"It's sitting on my shelf in a growing collection of old
iPhones," said Mr. Hampton, the editor in chief of newsletter
AutoBeat Daily. "I'm oblivious to all these offers."
Tripp Mickle contributed to this article.
Write to Sarah Krouse at sarah.krouse@wsj.com
(END) Dow Jones Newswires
January 09, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.