The other Apple economy: $2bn in devices on eBay

CEO Cook thinks Apple device resale boosts the company's ecosystem

While Apple just announced its second quarter numbers, there's another economy, not a shadow economy either, linked to the company that Apple doesn't report: Resale of older Macs, iPhones and iPads.

And that other economy isn't small.

On eBay in the US. alone, nearly $US2 billion worth of Apple devices - Macs, iPhones, iPads and iPods - were sold over the last 12 months, the company said.

Data provided to Computerworld by eBay showed that, as with Apple's own sales, the iPhone dominates and the Mac and iPad bicker over second place.

In Apple's universe, the iPhone accounted for a majority of sales for the seventh straight quarter: 53 per cent of Apple's $US37.4 billion in revenue came from new iPhones. The other two lines split most of the rest. The iPad accounted for 16 per cent of all revenue, while the Mac's share was a relatively robust 15 per cent up from 12 per cent the quarter before.

The iPod yes, people still buy iPods - accounted for just one per cent of sales, nearly a rounding error.

Like one of an infinite number of multiverses, eBay's old-but-still-salable world mirrored, more or less, Apple's line-by-line breakdown. On eBay, too, the iPhone dominated, with a sales share of 55 per cent of the total 12-month revenue of $US1.94 billion. On the auctioneering website, the Mac and iPad vied for most of the rest: The iPad accounted for 19 per cent ; the Mac for 20 per cent.

At eBay, though, the iPod was a heartier competitor, posting 7 per cent of the total sales of used Apple goods.

eBay's numbers aren't as accurate as Apple's - they were compiled by sellers' keywords, leading eBay to characterize them as "ballpark" rather than exact - but they're interesting nonetheless.

And while eBay's sales - both in dollar amounts and units - consisted of both new and used hardware, it was clear, both from spot checks of the site itself and from the eBay-provided data, that used dominated. Sales of the "Mac Laptop, All" category, for instance, which included older models such as the PowerBook, iBook and PowerPC-equipped Macs, as well as some newer machines, totalled $US161 million, or 42 per cent of all Mac sales by revenue.

So it was with the iPhone. Of the $US1.1 billion in sales on eBay of Apple's smartphone, 83 per cent were of the iPhone 5 and older. Just 17 per cent were of the iPhone 5S and 5C, the newest that Apple has released.

Revenue from sales on eBay mostly mirrors the splits in Apple's own financials. (Data: eBay.)

That's not to say retailers don't sell new Apple gear on eBay: They do. But the site slants toward used -- or as some sellers like to say, "barely used," as if it was a car that was driven only on Sundays, then by a little old lady from Pasadena -- because that's the eBay audience.

Outliers exist, naturally: When Apple had production problems with the radically-redesigned -- and cylindrical -- Mac Pro in late 2013 and through the spring of 2014, profiteers flocked to eBay, posting prices at nearly double retail value. When new iPhones have been in short supply, scalpers have resold those at exorbitant prices, too.

Apple's official policy, such as it is, is cautious support for the used device market. On Tuesday, CEO Tim Cook took a question about iPhone trade-in programs, and his answer could apply equally well to used Macs and iPads.

"My gut is that the cannibalization factor is low, because you wind up attracting people [who] are much more price sensitive," said Cook. "I think the great thing is that our products command a much higher resale value than others do. And so that leads to a larger trade-in and from my perspective, that [means a] larger ecosystem [because] more people wind up getting on iPhone. And if we get somebody to try an Apple product and then buy an Apple product, the likelihood that they begin buying other Apple products is very high."

The analyst's question about iPhone trade-in or buy-back programs, and Cook's answer, were connected, in a way, to eBay because the auction site is aggressively used by many of the vendors that specialize in paying cash for used Apple gear.

Firms like Gazelle and NextWorth, for example, often resell the iPhones and iPads they purchase from consumers on Amazon and eBay for the U.S. market. To unload inventory overseas, buy-back companies usually work with an intermediary, a wholesaler or distributor, who ships large quantities to their markets to sell locally at retail or on the street.

And prices, or at least average prices, of Apple goods on eBay are significantly lower than those for new goods.

While the ASP -- for "average selling price" -- of the new Macs sold by Apple in the June quarter was $1,255, eBay's Mac ASP from July 15, 2013, to July 16, 2014, was just $653. Apple's iPad ASP was $444; eBay's was $331.

Some of the eBay prices, naturally, were higher than the average. The ASP of a Retina-equipped MacBook Pro, for instance, was $US1639, reflecting the newness of those notebooks (Apple first started selling Retina MacBook Pro laptops in mid-2012.) Same for the iPhone 5S, Apple's flagship smartphone. On eBay, its ASP was $US605, not much less than the full retail price of an unsubsidized entry-level model ($US649).

"What I think is happening in the aggregate if you look across the world is that trade-ins are actually hugely beneficial for our ecosystem," said Cook this week. "Someone trades it in and then that goes to either somebody else in that country that is very price sensitive or somebody in a different country, and I see all of this as good."

He could have been talking about eBay.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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