A Secondary Market for the iPad 2?

Sales of the new and used Apple iPad 2 have soared in recent days after it was reported that the iPad 3 may be launched in the first week of March. The rash of iPad 2 sale listings on eBay, Nextworth and Gazelle, among other places, illustrates how an anticipated new product helps create “secondary markets” for older models. But these markets have a limited upside, and don’t necessarily translate into bigger gains for new offerings, say Wharton faculty experts.

As of Monday morning, eBay alone had 2,756 iPad sale listings, and crossed 3,000 listings on some days last week. Do these listings help to create new Apple users, or do they just reinforce users’ loyalty to eBay and the “buy it used” ethos? Wharton marketing professor Jonah Berger says secondary markets are good because they give a wide range of consumers a chance to try a brand’s products. At the same time, companies don’t make any money from customers who buy used products, he notes. 

“Most companies would rather extend the product line to have a lower-priced option that reaches consumers who might otherwise have thought about buying used [products],” says Berger. “Apple did this with the iPhone, for example, dropping the price of the older phones once new ones came out.”

According to Wharton marketing professor Barbara E. Kahn, these secondary markets mostly bolster loyalty to resell sites because people buying used iPad 2s are getting a big discount on the original sticker price. Also, eBay shoppers are generally different from those who rush to buy the newest models, although these secondary markets could become quasi marketing agents for newer models, she adds.

Kahn doesn’t see the iPad 2 secondary markets as significantly different than, say, the car market: When new models arrive, car dealers offer price discounts on last year’s models. However, the difference between cars and tablets is that if the car is new (but the previous year’s model), it is still worth a “new car” price (unlike a used car, where some of the price discount is attributable to added mileage), she notes.

For tablet PCs, the fact that they are used is less of an issue for customers, as Kahn sees it. “The lower price — compared to brand new models — is because the older tablet is missing some of the bells and whistles of the new item.”

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