eBay iPhone Worldwide Listings Skyrocket - First 3G $1,500 Listings Appear

As predicted, eBay iphone listings jumped dramatically the day before and day of Apple's 3G release. The vast majority of the increase is clearly from the non-gray market--Apple customers who are selling their first generation iPhones to pay for the 3G version.

But there's clearly a second group of iPhone buyers who are willing to pay $450-$650 for unlocked 8GB and 16GB USED first generation iPhones. Since all iPhone owners will benefit from software version two just released by Apple, the lure of an unlocked iPhone that operates on most GSM carrier networks far exceeds the perceived value of higher download data speed and GPS. The shortage of unlocked iPhones (just over 30%) is also driving prices higher.

The locked iPhones listed in the past 48 hours may be a litmus test for Apple and AT&T in the U.S. Sellers of these used locked phones will most likely sell at substantial discounts over unlocked ones. Sellers may also find it difficult to sell the locked units unless buyers are willing to purchase the unlocking software.

Despite buyer proclivity to pay higher prices for used iPhones, the iPhone, in my eBay experience, is the first smartphone to maintain high perceived value and final selling price. Until now, most used mobile phones on eBay have sold at significant discounts from new ones.

Scalpers began appearing during the 3G launch, attempting to sell the first 3G units in the $1,000-$1,500 price range with Buy It Now, and auction bidders quickly began bidding up 3G iPhone offers close to BIN prices.

Here are the eBay iPhone stats as of Friday, 7/11 @ 10 p.m. Pacific on eBay Worldwide. Keep in mind that other sellers around the world are also selling unlocked iPhones. eBay is only indicative of trends.

• Total iPhone listings reached an unprecedented 4,000+ units *
  
  
  • Used = 3,461 (86%)
    
    
  • Unlocked = 1,453 (36%)
    
    
  • 16GB Units = 1,776 (42%) - Percentages in this breakdown based on 4,247 units
    
  • -8GB Units = 2,151 (51%)
    
  • -4GB Units = 330 (8%)
    
    
  • Selling at Auction = 3,522 (75%) - Percentages based on 4,674 units
    
  • Buy It Now = 1,052 (23%)
    
  • Best Offer - 100 (2%)
    
    
  • Free Shipping = 1,031 (22% - Unusually high)
    
  
  
• 3G iPhones = 410 (10% - 2/3 16GB models - based on 4,000 units )
  
  
  • -210 already have 10+ bids
  • -29 claimed as "unlocked" already by sellers

As of 10 p.m. tonight, eBay worldwide shows 63,879 total cell phone listings. iPhone listings remain a drop in a very big mobile phone puddle.

* Disparity in the numbers is due to spurious numbers by one lot seller and eBay including accessories in the cell phone & PDA category. To calculate the percentages, I used the advanced search feature in eBay, tried to account for approximately 1,000 units for sale by the lot seller and disregarded any accessories or software included in the wrong category.

Steve Jobs Knows What I Want and "I Need a New Phone"

Amusing. Due to the globe spinning, the 3G iPhone hit Australia, then Europe, then the U.S. It appears so far that phone activations in all countries except the U.S. are going fine. AT&T and Apple--unprepared for the onslaught--experienced software activating glitches, requiring iPhone buyers to complete the final activation at home using iTunes. Ah....well...

The fun continues on Mobile Telephony Innovations...

iPhone Dumping Continues on eBay: Sellers Worry Over 3G

Apple released its promotional Apple 3G video today, touting the improvements of the 3G iPhone. Meanwhile, rabid dumping of iPhones on eBay continues unabated. Some sellers have resorted to "Sayn Design" gold 16 GB iPhones, selling in lots of 10 for $8,500.

While calculating total iPhones for sale on eBay is time consuming, due to CECT, HTC and other's including "iphone" in the listings, here are my best estimates of iPhones for sale on eBay worldwide as of July 1st, just 10 days before Apple releases the 3G version.

Total iPhones = 2,800 (800 in lots, mostly the 16GB "gold" version)

Total Unlocked = 2,500+ (very few locked iPhones are now available as 3G approaches)

16GB Model = 1,300

8 GB Model = 1,000 (few in lots)

4 GB Model = 139

The total number of iPhones clearly doesn't total 2,800, due to listing in a category other than "cell phones & PDA's" and unclear listings about number of units.

The BIG change: According to my estimates, 90% of iPhones advertised in the past week SOLD, compared to 30% two months ago before the 3G announcement. iPhones sold through other non-eBay stores, I believe, raise the total dumping above 3,000 units.

When July 11th hits, there's no reason to believe that iPhone unlocking and re-selling through unauthorized channels will continue. Demand for unlocked units is so high that the total 8GB price of $199 + $36 activation + $175 early termination fee + $30 unlocking ($440) will not dissuade continued out-of-channel sales.

As I pointed out in an earlier post, this will hurt AT&T the most in the U.S., but will impact international carriers as well, as unlocked iPhone purchasers break contracts and purchase multiple SIM's to obtain cheaper rates in European countries and elsewhere around the world.

Moreover, with over 300,000+ unlocked iPhones already operating on China Mobile, iPhone use will rise as additional unlocked 3G units become available in the open market.

While China Mobile never signed an agreement with Apple and will benefit from further activations, other international carriers and AT&T in the U.S. will experience higher initial financial losses than expected through the subsidy. T-Mobile's emerging 3G network in the U.S. will also eat into AT&T profits as it aggressively rolls out its broadband network and iPhone users switch to T-Mobile.

Laughing all the way to the bank will be Apple, which finally realized selling iPhones at high margins, as with Macs, will bring home the bacon.

Apple 3G iPhone Impending Profit Loss for Mobile Carriers

AT&T will now subsidize the 3G iPhone, paying Apple $200 for each 8GB model, but AT&T and other carriers will no longer pay Apple a share of revenue, Apple's original profit estimate will drop.


If the unlocking contnues, as expected, AT&T's expected revenues and profits from the device will also drop. But international carriers will face the largest profit loss as millions of their customers purchase unlocked iPhones and multiple SIM's for use outside each carrier's service area. The full story on MarketingVisions.

Cell Phone Carrier Customer Loyalty Programs to Reduce Churn

Wireless carriers in the U.S. are under pressure from the Feds and consumers to either eliminate or pro-rate early contract termination charges. Carriers argue they need to charge customers who break their contracts due to marketing and discounted handset costs, while wireless subscribers want the freedom to switch carriers at any time.

The major U.S. carriers--AT&T, Verizon, Sprint and T-Mobile--face class-action consumer lawsuits, a Federal Communications Commission investigation and Congressional action to trim or eliminate "lock-in" contracts preventing wireless subscribers from jumping ship. Meanwhile, Sprint/Nextel continues dealing with high monthly churn rates.

A recent BusinessWeek article --"Hanging Up on Early Exit Fees"--summarizes the carriers' dilemma. If they drop or pro-rate early termination fees, their profits drop. On the other hand, consumer demand for contract elimination--and class-action lawsuits--will cost carriers much more than simply dropping contracts entirely. Read my earlier post on the subject.

Unlike other industries that recover marketing and other customer acquisition costs during the initial purchase--say, a kitchen stove or audio system--mobile carriers in the U.S. recover some of their marketing costs on the back-end when customers break contracts and leave. Yet, carriers, like other businesses, lose money every time customers cancel service, requiring additional marketing costs to replace them.

Rather than punishing subscribers by charging early termination fees, the carriers should reward customers who choose to stay using customer loyalty programs.

For example, most credit card companies--including CitiBank via the "Thank You" program--offer points convertible into merchandise or cash. Internet companies, such as GoDaddy.Com continually reward customers with "15% off your next purchase." American and other airlines issue points redeemable for airfare discounts. Zappos.com, a successful online shoe e-tailer, thrills its loyal customers with guaranteed purchase satisfaction and free shipping on initial and returned purchases. Successful companies increase customer satisfaction by using the carrot--not the stick.

To avoid further consumer disaffection or Federal intervention, wireless carriers should build stronger customer relationships by rewarding loyalty, offering reasonable pricing and improving customer service levels.

3G Apple iPhone Speed Dilemma: Why Steve Jobs is Praying

It's buzzing out there in iPhone land. While rumors run rampant about the "3G iPhone," enabling fast Web surfing, gaming and other applications, neither AT&T, Apple, Steve Jobs or God know how a 3G-enabled iPhone will perform on AT&T's broadband network. (Well, maybe God.)

My previous experience with AT&T's broadband network--slower than Verizon and Sprint's EVDO nets--leads me to believe there's trouble brewing due to the iPhone's large screen, 3G chipset and battery. That's the main reason, per Jobs, the iPhone wasn't designed for 3G in the first place. (See my iPhone review for background.)

3G mobile phones on AT&T's 3G net already stall and drain batteries quickly when streaming video or surfing the Web. Version one of the Samsung BlackJack is a good example. When first released, the underpowered battery drained like an SUV's fuel gauge. Samsung then released BlackJack II with a more powerful battery, but the trade-off was a thicker phone. (See "Batteries Draining at CES in Vegas.")

Enter the iPhone with its large, high resolution screen--twice as large as the BlackJack II. Each screen pixel from top-to-bottom must activate to render a viewable screen. The larger the screen, the more time it takes to fill it. And, if I'm correct, new iPhone purchasers, who've experienced Wi-Fi on the iPhone, will be greatly disappointed, especially while streaming video on AT&T's 3G network.

Power drain on Verizon's Voyager and Sprint's original CDMA Touch phone and new Touch Diamond, scheduled for release in June, are less problematic due to EVDO's faster data speeds. The Voyager most closely matches the iPhone's screen size and the Touch's screen is considerably smaller. (Click here for a Phonescoop comparison.)

As I've commented previously, Apple entered the mobile phone market without any wireless experience. The company has struggled to please customers and carriers by lowering prices, changing internal memory and trying to understand international mobile phone distribution. Meanwhile, hackers continue unlocking the device, Apple counters with new firmware to disable hacked iPhones and dissatisfied customers continue dropping iPhones on eBay.

Taking advantage of Apple's troubles, AT&T announced an iPhone price reduction on its own, after discovering that 40% of iPhone buyers are new AT&T customers. Training its reps to better understand customer needs is also in the works, due to customers' numerous dismal experiences. AT&T, along with other carriers, continues testing new pricing and contract strategies.

Wireless competition is undeniably fierce. Manufacturers and carriers must strike a balance between form factors, functionality and price. Meeting customer expectations is the key element for success in the smartphone market.

The Elimination of Cell Phone Contracts & Early Termination Fees

AT&T, Sprint, Verizon, T-Mobile & Others: It's time. Get rid of your contracts and eliminate early termination fees. You're living in the pre-Mobispheric age.

AT&T announced recently that it would start reducing early termination fees by $5 per month ($60) per year off its current $175. Sprint apparently is (will) do the same and Verizon made similar changes in 2006.

Until recently, the wireless carriers told customers 1-2 year contracts were necessary to subsidize handset discounts. With the exception of higher-end mobile handsets--smartphones and PDA's--this is deceptive and untrue. Carriers who supply a cheap flip phone handset pay virtually nothing at wholesale from their suppliers. And customers, who choose higher-end smartphones and PDA's, amply reimburse carriers for handsets in less than six months based on over-priced data plans. Moreover, increasing numbers of customers now purchase their own unlocked GSM or CDMA phones on the Internet. Read my MarketingBeyond post for background on cell phone pricing strategies.

Carriers lock customers into contracts for only one reason--the guaranteed revenue stream. The average cell phone customer in the U.S. pays about $55 per month. A two-year contract, based on that price, generates a minimum of $1,320 over a 24 month term. While customer acquisition, marketing and operational costs eat into carrier gross profits, locking customers via contracts is unethical and a poor pricing strategy to recover these costs. (Satellite TV companies, such as DirecTV, whose upfront installation costs for dishes and receivers, have a legitimate reason for contracts.)

Carriers, realizing that the U.S. cell phone market is saturated (250 million active handsets, mostly used for voice services) recently introduced unlimited voice plans at $99 (Verizon and AT&T Mobility) for two reasons. First, average individual or family plan contract customers rarely exceed the 400-1,400 maximum minutes and, if they do, carriers usually write-off the excess minute charges when customers threaten to change carriers. As long as carriers' networks can handle the additional traffic, they don't incur higher fixed costs.

Encouraging customers who primarily use their mobile handsets for voice to buy data plans is the main reason for the change to unlimited voice plans. Monthly data plan charges vary from Sprint's $15 basic Internet package to Verizon and AT&T's $50 for Enterprise-level BlackBerry service, producing an additional $360 to $1,200 over a 24 month contract.

To ensure continued profitability, carriers are marketing data plans to consumers, predicting enough users will opt-in, as mobile customers in Asia, Europe and the U.K. have done for years. "On-Deck" data applications and Web access--the news, weather, sports, horoscope and applications provided by carriers and their partners--produce the highest profits. "Off-Deck" applications, encouraged by the Google Android initiative and accessed through the mobile Web, bypasses carrier control and is less profitable. Carriers only charge for data usage. As innovative off-deck applications reach the mobile market, carriers will compete for application revenues to increase profitability.

Download my ideal Android phone PDF on MarketingBeyond for a glimpse into the future of mobile telephony.

"Keep the Customer Satisfied": Spread the Word

MarketingBeyond blog readers may have noticed I have a category called "customer service marketing." Why? Because, as I've pointed out in numerous posts, companies are losing billions due to poor customer care--and ALL industries are impacted from cell phones to computers to consumer appliances.

Cell phone companies. I'll boldly claim that quality customer service will nearly always convince customers to stay with a carrier over everything else. Why? Because if mobile carriers, like any other business, can't quickly solve customer problems or issues, their network size or latest razzle-dazzle promotion will fail. While price and other factors are important, customers want service and solutions.

T-Mobile customer care today again convinced me how true this is in cellular. As a mobile geek, I frequently float from carrier-to-carrier to complete phone reviews and assess carrier service. By far, T-Mobile provides the best customer service of all the carriers.

Today's issue was fairly simple. I ported one of my three lines from Sprint to T-Mobile recently so I could rate T-Mobile's new Nokia 6267, a 3G-equipped phone once T-Mobile launches 3G in the U.S. I returned the phone several weeks ago and received my T-Mobile bill yesterday still showing a $36 activation fee. A quick call to T-Mobile customer care and the $36 was credited to my account.

But that's not what impressed me. I knew T-Mobile would credit me for the activation charge, since I'd cancelled service during the "buyer remorse" period (strange phrase, hm...) What delighted me about the phone call had more to do with the friendliness and helpfulness of the CS rep. Despite my leaving T-Mobile (for the time being), she was cordial and didn't hassle me about staying with T-Mobile. My customer experience was totally positive, reinforcing good feelings about T-Mobile.

Case two: Sprint. I ported two lines from Sprint to AT&T when I was testing the iPhone, then ported both lines back to Sprint after a negative experience with an AT&T retail rep. I knew Sprint was (is) in the middle of merging billing systems; so I expected a messy bill, despite assurance from a Sprint supervisor a while back promising me a $400 credit after porting back. Well...my bill arrived yesterday--a mere $687--without the $400 credit and $75 in data charges, due to a screw-up when I changed from the HTC Touch to the BlackBerry 8830.

Sprint must have hired someone with humor in billing, because the new bill pages have titles like "Hello!" on page one, "Details, details (continued)..." on page 10, "Details, details..." on page 9 and "Want a shorter bill?...Switch to summary format..." on page 11. Humor is always good, especially when your bill is $687.

But I felt confident the issue was resolvable, because I kept copies of emails confirming my $400 credit. So I zipped off a copy of the email to Sprint yesterday and today I received an intelligently written email reversing out the $400, plus $75 in data charges and two $26 re-activation fees. (If you have Sprint, by the way, always use email for customer service, because they're still trying to improve their call center operations.)

Cell phone companies, naturally, are not the only businesses with poor customer service. As I wrote in a MarketingBeyond post recently, bad customer service is zapping all sorts of companies. Technical support is also suffering. (Read my tech chat posts on Hewlett-Packard).

Case three (busy customer service day for me): Cuisinart. My coffee maker filter basket flow control fell off. I quickly called Cuisinart, gave the CS rep my serial number and the company is shipping me a new basket at no charge. Let's see...that's one broken carafe and one defective basket (see my Amazon.com/Cuisinart post.)

The March 3, 2008 edition of BusinessWeek has a rating of customer service levels among 25 companies, including Sprint's continuing struggle to raise customer service levels. I believe it's mandatory reading for anyone serious about customer service in this country.

Until the majority of U.S. marketing executives improve their customer service operations, their companies will continue upsetting their most precious asset--the customer. "Keep the customer satisfied" has never been more important than in today's consumer-driven economy.

iPhone Sales on eBay USA

MTM reported on Apple's iPhone marketing challenges recently--specifically, the number of unlocked iPhones for sale on eBay USA. Today, I reviewed iPhone sales developments on eBay USA and discovered some interesting stats:

• As of February 16, 2008, there are 3,627 iPhones for sale (auctions and Buy It Now)
  
  
• Of the 3,627, 1,154 are locked to AT&T and other Apple approved carriers and 2,473 (68%) are unlocked. 702 unlocked iPhones were for sale during my last count.
  
  
• Looking at the most recent completed sales (I used averages from the first three listing pages)
  
  
• 65% of all iPhones sold while 35% did not.
• 67% of all unlocked iPhones sold; 33% did not

Observations:

• The 16GB iPhones have hit eBay, potentially lowering the closing prices of 8GB models.
  
  
• Over a third of all iPhones don't sell on eBay with the first listing, whether locked or unlocked, forcing sellers to re-list. iPhone buyers may also be waiting for the 16GB model or purchasing their iPhones through authorized channels.
  
  
• The number of unlocked iPhones is skyrocketing rapidly.
  
  
• More than a third of all iPhones listed on eBay are used, possibly revealing product dissatisfaction.
  
  
• Only a few sellers are engaged in large lot sales of 50+, but a growing number of sellers are offering up to 5 units, the maximum number obtainable from an Apple store in a single visit.
  
  
• Buyers who purchase unlocked phones are willing to pay a premium of $100 or more rather than use unlocking services. Most unlocking service listings I counted did not sell.
  
  

As Apple seeks additional international carriers to market iPhones, its marketers need to better understand the gray market for distribution of this mobile device.

Can Retail Survive? Can Retail Delight Customers?

We've all had the same experience. As e-commerce grows and more retailers go online, untrained, non-proactive retail reps populate the stores. Unless retailers better train and empower their reps to delight customers, retailing may, indeed, die a slow death. Read the full story about AT&T on MarketingBeyond.

iPhone Failed Marketing Strategy: Unlocked Devices and Apple Greed

Apple entered the mobile phone business without any experience and now it's paying the price. In a previous post on Mobile Telephony Innovations: "Google Rises, Apple Falls--Poor iPhone Marketing Strategies, I summarized Apple's deal with AT&T, price reductions, Google's Android initiative with the Open Handset Alliance and sales of iPhones on eBay.

Today's announcement of one million unlocked iPhones (nearly 30% of units), reducing Apple's continuing revenue share with AT&T and massive unsold inventory reveals all is not well. Analysts estimate that for every one million iPhones sold, Apple loses $300M to $400M in future revenue and profit. Convincing overseas carriers to accept a revenue share is now hampered. Witness China Mobile's recent rejection.

The main reason for the failed strategy is Apple's greed. If it had never linked iPhone activation to iTunes and followed AT&T's standard activation procedures, iPhone buyers would have been locked into AT&T's 14 day (30 in California) return policy with a two year contract. During the purchase, AT&T would have also obtained the original IMEI number  and buyer information. 

Since Apple chose iTunes for activation, hackers immediately jumped in to unlock the device, followed by Apple's ineffective software update to stop them. The product itself, although flawed, is a significant advance in touch screen mobile devices. (Read my review.) But Apple should have followed standard carrier activation procedures until established in the global wireless market.

Update on 2/18/08.  I Googled  "unlock iphone imei itunes sync 2008" and got over 11,000 hits. iPhone owners who want to unlock are clearly confused about iTunes synchronization, IMEI numbers and software and firmware updates. In addition, while eBay listed 706 unlocked iPhone listings (not including lots) on the day of my first blog post,  eBay now has 2,129 unlocked listings  and 2,909 total listings (including lots) on 2/18/08. SIM card listings have risen to 61 for the 1.1.2 firmware upgrade only.

Apple's iPhone: Will it Make It in 2008?

Troy Wolverton, writing in the San Jose Mercury News, gave accolades to Apple's iPhone as "...the product [having] the most impact this year on business and technology." 

As I've written in my blogs and in response to other Mercury articles, the introduction of Apple's iPhone by Steve Jobs at MacWorld was a marketing strategy to pre-announce Apple's first mobile device quickly, then tantalize potential buyers for six months before its release. 

When Jobs and Apple realized they wouldn't make the June deadline, thousands of programmers, who otherwise would have continued working on Leopard, Apple's new operating system, were diverted to iPhone development. Meanwhile, HTC was developing its Touch phone, approved by the FCC in July, concurrent with other handset makers, furiously designing innovative Windows, Linux and Symbian-based smartphones. 

Tim Bajarin from Creative Strategies, whom the Mercury News quoted as saying " ' Apple proved they could deliver the Internet in your pocket, ' " is greatly overstated. Once iPhone buyers learned that Job's MacWorld web surfing demo used WIFI rather than AT&T's slow EDGE data network, the balloon began to burst. That's why FLASH was not designed into the first release. AT&T's EDGE data network can't support the required broadband connection. 

After new iPhone users complained about slow browsing, including David Pogue of the New York Times, Jobs tried to wiggle his way out of the dilemma claiming correctly that 3G chipsets would have increased battery drain, a sore point with iPhone customers because its battery requires factory replacement. 

That Apple has met its quota of iPhone sales is based on customer loyalty and price reductions. Meanwhile, Apple and AT&T attempted, until recently, to restrict third-party developers, who would bring innovative mobile applications to the iPhone. 

Despite serious concerns about Google's entry into wireless with its support of the Open Handset Alliance and Android/Linux-based mobile devices, Google had "the most impact this year on business and technology" in mobile space--not Apple. 

As I've written in my MarketingBeyond blog, Android-based mobile devices in 2008 will dominate the mobisphere, while Apple, at best, will release a 3G iPhone globally, competing with Nokia, Motorola, Samsung and others. Whether Apple can pull it off is a question mark.