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Markets in everything: buy put options on your gadgets
You pay a small fee up front when you buy a new gadget. In return, you get the right to sell it back to them for a pre-determined price at a set time. With an 80GB iPod, for example, you pay $9 up front to be able to resell it for $50 in a year, $40 in two years and $20 in three years.
They're currently taking contracts on iPods, name-brand laptops and desktop PCs, GPS units, flat-screen TVs and more. All in all, the return on investment seems sub-eBay, but if you're really into long-term planning, the sureness might be worth the penalty.
Here is the full story, and thanks to Eric Kimbrough for the pointer.
Posted by Tyler Cowen on January 19, 2008 at 02:57 PM in Web/Tech | Permalink
Comments
Wonder how they are going to do the accounting
for this?
Posted by: sa at Jan 19, 2008 6:09:28 PM
Wonder how they are going to do the accounting
for this?
I wonder who is going to guarantee performance on the puts.
I have an 80GB iPod. I think the put is a bargain at $9. I'm pretty confident that three years from now I will want some other device - maybe a 10TB iPod - and will be happy to sell the old one for anything at all. But I'm not buying a put because I have no confidence that I will actually be able to exercise it.
Posted by: Bernard Yomtov at Jan 19, 2008 11:57:28 PM
It takes care of problems with electronic recycling. It isn't that cheap or easy to recycle electronics if it is done correctly. It really isn't any different then a lease, except that the purchaser pays the entire amount up front eliminating credit risk, etc. Leases include impeded puts + financing. Un bundle a lease and buy the part you want.
Posted by: Zigurrat at Jan 20, 2008 12:11:08 AM
There is a growing trend for governments to mandate recycling, making manufacturers responsible for taking back products at end-of-life-cycle. Perhaps this company's core paying clients will end up being electronics manufacturers rather than the general public. Still, they could make money off the general public too: remember that "extended warranties" are extraordinarily lucrative.
By requiring that the device still be in working condition when bought back (as they presumably do), they retain the option of shipping it off to some third world country for resale there, possibly at a profit, rather than fuss with dissassembly and materials recycling. A lot of used clothing gets resold overseas that way.
Posted by: at Jan 20, 2008 12:50:36 AM
According to their FAQ, they pay a bit more if the returned device is in "excellent condition" and somewhat less if it's in "poor condition".
Missing original manuals, installation disks, accessories, and packaging counts as "impairment". Who hangs on to those?
Posted by: at Jan 20, 2008 1:09:03 AM
good post
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Posted by: waseem at Jan 20, 2008 1:08:04 PM
That setup reminds me of the switch from instant-reduction-in-price style sales, to mail-in-rebates. Many people won't qualify for the rebate, forget to turn it in, or have it lost in the mail, and then take long enough to return the rebate that the price reduction is almost like a loan to the firm offering the rebate.
Here many customers may well lose the item, break it, or damage it enough to incur penalties. It also seems like a good bet on inflation. The firm taking and reselling the electronics also gets value-added profit out of being an organized reseller and packaging the used goods that no ebay user would muster.
Posted by: Jedediah at Jan 21, 2008 4:30:23 AM
I wouldn't think the durable goods demand on a used Ipod or computer that is more than a year old would bring that much profit or interest in the TechForward market. However, after reading some of the other posts I agree that they will probably end up turning a profit due to the fact that no one keeps up with things like mail-in rebates, which this particular program resembles. And I am sure when consumers purchase this deal they'll either forget about it by the time their due date is up or the gadget won't be in as good a shape as anticipated which I guess would void their contract.
The echoNEW program seems to be buying in to the industry with more rationality than TechForward by opting to not charge for the recycling of the products.They will probably receive more business from the individual market because of this. Either way, it will be an environmentally sound idea.
Posted by: sph at Jan 22, 2008 12:05:06 AM
The problem with getting an iPod for $50 in a year after it was bought is that most consumers will be moving on to the new iPod products that apple has to offer. In light of recent events though, including the continuing decrease of the economic wellbeing, consumers may very well take up the proposition of getting an older iPod but for much less.
Posted by: Matthew at Jan 22, 2008 8:53:13 PM
