What the Secondary Market Tells us about iPad Availability
I recent wrote how I wasn’t sold on the premise that Apple’s quarterly iPad sales figures are largely influenced by supply chain dynamics. This morning I took a quick look at the secondary market for (used iPads). I didn’t perform an indepth study, but even a precursory examination tells an interesting story.
First, here are the current prices for new units from Apple:
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These were of course the same prices for the original iPad until it was superseded by the iPad 2. There is also no price differential in the primary market for color – though as you will see there is some indication of a price differential for color in the secondar market.
As a proxy for the secondary market I pulled pricing data from closed eBay listings where there was at least one bid. I ignored Buy-It-Now and Best-Offer auctions. This was in no way a thorough exercise. I pulled information for the most recently completed auctions and in total only pulled about 1,000 listings. Included in these were results for 16GB and 32GB models, for Wi-Fi only and Wi-Fi + 3G models, for both first generation and iPad 2 models, and for the iPad 2 listings I included both Black and White models. Finally, I only included used models though I didn’t go to great lengths to check the descriptions of each item so item pricing might be influenced by other aspects of the auction listing like included cases or accessories or differential shipping costs.
Here are the data from the secondary market:
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A few take-aways from the tables below:
1) iPad 2 models sell for a higher price in the secondary market than their predecessors. On average, iPad 2 models sale for 30-40% more than first generation iPad models. This is logical enough. Devices have a given level of durability and I doubt the iPad and iPad 2 models experience a differing degree of durability. The iPad 2 models sold in the secondary model are likely newer on average than the original iPad models sold during the same time period. Thus, less of the durability has been exhausted on these models. Moreover, the iPad 2 has additional functionality including a camera, thinner form factor, and color options.
2) There is a premium for Wi-Fi + 3G models over Wi-Fi only models. There is a small 5-10 percent premium for models with 3G capability. This relationship appears to hold for both the original iPad models as well as the iPad 2 models. This is consistent with point #1 above. The Wi-Fi + 3G models include GPS functionality while the Wi-Fi only models do not. Therefore, regardless of one’s intention to activate the 3G service, the Wi-Fi + 3G models are more feature rich.
3) There is generally a premium for White iPad 2 Models. There is generally a small 5-10 percent premium for the white iPad 2 model over the black iPad 2 model. This shows the value of differentiation.
4) The premium for 3G capability is lower in the secondary market. For new iPad models, consumers will pay a premium to have 3G capability (and GPS consequently functionality). This premium is 22 percent for the 32GB models and a 26 premium for the 16GB models. As I pointed out above, the premium in the secondary market is closer to 5-10 percent. This result could be driven by heterogeneous audiences – with those buying new iPads more willing to pay a premium for 3G connectivity. However, I doubt this explains the entire difference.
5) Wi-Fi Only models maintain a higher percentage of the original MSRP than Wi-Fi + 3G models. This holds for both original iPad and iPad 2 models and for both 16GB and 32 GB models. For example, 32GB iPad 2 Wi-Fi Only models sell for 90 percent of the MSRP in the secondary market compared to 75 percent of the MSRP for 32GB Wi-Fi + 3G models. Again, this could be caused by heterogeneous customer segments, but I don’t believe this would explain the bulk of the entire delta.
Again, I only pulled about 1,000 observations and did some basic data cleaning, but in now way performed a fully encompassing data cleansing. These are rough estimates that could change (even significantly) given more attention to the data.
Still, I think it shows that important dynamics. If supply constraints were having a large impact on demand I would expect to see higher prices relative to MSRP in the secondary market. More, as I wrote earlier today, the higher discount rates for Wi-Fi + 3G models in the secondary market suggests a more full equilibrium between supply and demand on a model basis will result in a lower average price point, with a higher share of Wi-Fi Only and 16GB models generally.