iPhone 4 launch: the grey market knock-on effect

Tuesday, 29 June 2010 13:33  |  James Barton

Since the launch of the iPhone in 2007, much has been written about the Apple smartphone, its features and its overwhelming success in the market. But, a little known fact is that the original iPhone and its predecessors have created a huge grey market, where iPhones are bought and sold in bulk internationally outside of official distribution channels.

Like any other commodity, the iPhone parallel market hinges on factors such as exchange rates, supply/demand fluctuations, future announcements and of course, Apple's policy.

One amazing feature of this market remains the difficulty in obtaining iPhones in sufficient quantities, leading to the "trade" price often exceeding the retail price in Apple stores - not taking into account the network operator's subsidy.   Companies regularly buy Apple iPhones, from countries like the US and export them into other countries not yet served by the Cupertino giant, where the average punter craves the Apple gadget.

Dan Quinn from gsmExchange.com, the world’s leading wholesale trading platform for mobile phones commented “gsmExchange is in a unique position to record the progress of all previous iPhone models and project the growth of future models in the grey market”.

He continued “For the iPhone 4, from a trade perspective, the wholesale community can expect a peak in prices straight after launch, with demand outstripping supply. After the launch and over the course of the following 6 months, the iPhone 4 would be expected to drop in price somewhere in the region of 4 – 6%”.

The three previous iPhones have all decreased in price over the first 6 month period, although this figure has continuously reduced per model. The original iPhone saw a drop of 21% in the first 6 months, the 3G model reduced by 11% and the latest 3GS only reduced by 9%.

On the other hand, statistics from phoneLot.com - gsmExchange.com’s sister site dedicated to retailers - has revealed that demand for the outgoing model could remain in place for up to 6 months although the price will continue to drop. One major consideration for traders is whether or not the difference between the iPhone 4 and the iPhone 3GS will be so extreme that the 3GS could become obsolete overnight. In July 2009, Apple launched the 3GS model to take over from the existing 3G phone. On this occasion, the difference between the two models was relatively minimal and demand for the 3G model remained high. In contrast to this statistic the original iPhone disappeared overnight after the launch of the 3G version. phoneLot recorded a decrease in requests of up to 85% for the original iPhone between June and July 2008.

Early indications from the gsmExchange.com trading platform is showing an expectation of an event similar to that experienced in 2008. Prices fell sharply on the trading floor today with some traders posting offers up to $50 less than before the iPhone 4 announcement.

It is difficult to give precise estimates for the exact size of the iPhone grey market,  but figures from both mobile phone trading platforms gsmExchange.com and phonelot.com suggest that as many as 57000 units are traded on a monthly basis.

More info:

• www.phonelot.com
• www.gsmexchange.com

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