Amazon Expands Trade-In Program
Trade-in programs are nothing new; a wide variety of
retailers are offering variations on the theme. Amazon.com also offers a trade-in
option, but as is its way, the e-tail giant is looking to one-up the competition
with what it believes is a better offer.
Yesterday, Amazon announced the launch
of its Electronics Trade-In Store, which allows consumers to send in a wide
variety of electronic devices, including cameras, cell phones, GPS devices,
MP3 players, tablet devices and more. The electronics program is added to the
company’s existing trade-in offer
on items such as DVDs, textbooks and video games.
The company offers an
online guide to items it accepts as trade-ins (previous purchase at Amazon
is not required) and the relative value based on product condition. All trade-ins
can be arranged through a single point on the Amazon site and multiple items
can be shipped to the company for free. When a customer trades in an item,
they receive an Amazon gift card deposited in their personal account in return.
"Technology is constantly evolving and newer, better versions of consumer
electronics are introduced all the time," Paul Ryder, vice president of
electronics for Amazon, said in a press release. "We want to give customers
the opportunity to get great value from their used electronics. Hundreds of
thousands of customers have already received millions of dollars in gift cards
from the other products in our program. The electronics category is a natural
extension and we are delighted to offer our customers more trade-in options."
Discussion Questions
Discussion Questions: Are trade-in programs becoming basic to retailing today, at least in categories such as electronics? What can retailers that offer such programs do to set themselves apart from the competition?
The key will be simplicity and value. Amazon has made trade-ins simple through free shipping and the Amazon gift card. Consumers can send in electronics and buy any items they want from Amazon, not just electronics. If Amazon also provides fair trade-in values, this will give them a significant leg up over Best Buy for consumer electronics trades. When coupled with Amazon’s recognized advantage in customer service, this is a significant step for the retailing giant.
Considering how much consumers are being asked to pay for electronics products and how fast they become obsolete, trade-in programs will increasingly become expected by customers and are a good differentiator for retailers who can afford to run them, like Best Buy and Amazon.
No wonder Best Buy just announced the same deal, all over the TV networks just this week, as Amazon has reached out to take away all the business. If the trade-in is reasonable, and the credit is put onto the card, than it is a no brainer for the consumer to spend more money at Amazon. Great concept, great company to deal with.
Trade-in programs are needed to address a stark market reality.
Today’s consumers–especially consumers of technology items–understand we have evolved from a system of built in obsolescence (where the value of a product decreased over a fairly lengthy period of time–think a five to seven year lifespan of a car manufactured in the 1950s or 1960s) to a system where goods are inherently obsolete at the time of purchase.
The computer you buy today is more expensive, slower and has less memory than the one you buy tomorrow. The phone you get next week has fewer “cool” features than the one you could purchase next month. The flat screen television you buy today has less clarity and a smaller screen than the one that will be available next year. And so on and so on and so on.
Given this reality consumers in certain categories increasingly demonstrate less loyalty to an individual object (cell phone, laptop, etc.) than they do to the idea of having the latest iteration of a technology. They also have little or no “pride of purchase” experience,
So, in such a world, is it any surprise that retailers have to create programs to take back products that are inherently disappointing to those purchasing them?
Trade-in programs were mostly for high ticket items like cars and boats. Since the 2008 recession, it has been difficult to get consumers to open their wallet. Many have been using discretionary funds to pay down debt. This has hampered select category sales. Just like lay-away programs, they are designed to get the consumer to purchase.
The reverse logic chain can be profitable from electronics products when disassembled. Additionally, there is a green element to this trade in program of reducing land fill. Amazon has the potential to capture more sales form Best Buy, PC Richards and the remaining electronics retailers. Whether this program will last long term will depend on it being operated at a profit and consumer attitudes when the economy improves.
Amazon has one clear edge build into its trade-in program that Best Buy will be hard-pressed to match: assortment. A credit earned on Amazon may be spent on a book or a music download or a pair of shoes. A credit from Best Buy may be spent on the next obsolete-in-the-box electronic gadget…. The trouble with trade-in programs, in my opinion, is how they remind shoppers that they are being ripped off on tech purchases in the first place. I don’t see them spreading to places like Costco and Walmart because they add too much complexity. Buy.com might take a shot at it, though.
Trade-in programs serve two purposes. First, consumers can recoup some of their money on an outdated product allowing them to trade-up to a newer version. Second, it may also be a sustainability advantage. If I trade-in my old electronics I do not have to hunt or wait for a recycling facility or event that accepts electronics and I can hope that the older product will be sold to someone who needs it or that it will be recycled responsibly. I expect that these programs will become common because consumers are happy to receive a gift card and then it has to be spent at the retailer issuing the gift card.
Certain items make sense on a trade-in program. Complex electronics which become cheaper every day (and at times even obsolete) are not one of these. The market for used, year-old, or 2-year old computers is limited. With new products costing $500 or even less, and new operating systems coming out every year, this is even more problematic. Televisions, DVRs, iPhones, etc. are all part of this preplanned obsolescence. Perhaps games, CDs, DVDs, and even cellphones are a growing market for used items because of their longevity, but these are unique and should be identified as such.
Trade-in programs aren’t retailing table stakes just yet. But brands like Amazon and Best Buy are succeeding in raising consumer expectations. Such programs also mesh well with today’s more savvy shoppers who are on the hunt for savings–as well as shopping convenience and more mindful consumption of products across categories.
There are various ways that retailers can leverage trade-in programs or differentiate their programs, like accepting products purchased at competing chains, eliminating any fees associated with the trade-in and/or allowing consumers to funnel the trade-in rewards to favorite charities. And other merchants outside the consumer electronics and CD/DVD/book segments should keep an eye on these programs and begin to think of ways that they too can leverage the programs to differentiate their offering.
Trade-in programs are going to be increasingly important in consumer electronics and technology in general. Amazon is smartly raising the stakes and fully leveraging its breadth and depth of merchandise and doing it in a way that is good for them, good for customers and bad for companies like Best Buy and eBay.
Amazon’s trade-in approach is elegantly simple and easy for customers and takes advantage of several opportunities:
1) To trump Best Buy’s “buy a call-option” approach that they proudly trumpeted during the Super Bowl.
2) People’s obsession with “shiny objects” and the role of consumer electronics/personal technology in today’s society.
3) Increasing the purchase and re-purchase frequency of customers.
Once again, Amazon is continuing to be lengths ahead of nearly every retailer on the planet and a formidable competitor for most of them.