TechForward's Pricing Strategy: Cash Floats and OPM

The San Jose Mercury's article today on TechForward, a Los Angeles-based company that buys back your used consumer electronics devices, reinforces how gadget-oriented we've become. TechForward's pricing strategy for the new service is a way for consumers to own the latest in consumer technology--the same strategy used in leasing, rather than buying, a new car. The value of the gadgets in our lives varies from day-to-day. I've seen smartphones on eBay, for example, priced at over $500 one week and sell for $400 or less the following week. It's a very slippery market that will intensify in the cellular industry this year, as Google's Android initiative generates waves of new mobile devices, features and applications. Consider GPS and Wi-Fi on mobile devices. Before these features were available on mobile devices, they never determined cell phone pricing. Now that they're become commonplace on mobile devices, such as the iPhone, Nokia's N95 and RIM's BlackBerry 8800 series devices, they raise mobile device value while decrease re-sale prices. TF's pricing strategy makes sense. The consumer must pay a fee upfront to TF for each new device. Second, the buyback amount--whether mobile devices or computers--appears extremely low, even if the item is only three months old. Third, TF determines the item's condition to determine the buy-back price. Scratched and battered consumer elecronics gadgets don't sell, and TF will probably send customers a lot of $20 gift cards for virtually worthless items. Last, getting your check takes up to 60 days, revealing TF's main pricing strategy--floating cash to build TF's business, invest and sell in lots in the wholesale market, including eBay itself. It's the same marketing strategy as PayPal and other financial companies, based on the OPM philosophy of using other people's money. For further information, check out TechFoward's website.