Baker argues used iPhone resale value enables Apple to charge premium prices while maintaining lower effective consumer cost.
“When you trade in your phone, you capture that. That lets the used iPhones retain their value better, supports a dramatic price premium for Apple.”
Baker says used iPhone resale value enables Apple to charge consumers less effectively than Android despite higher sticker prices.
“Used iPhones retain their value much better than used Android phones. When you trade in your phone, you capture that.”
Baker explains Apple's effective price is $600 versus Android's $850 due to trade-in value differences.
“That comparable Android phone is being traded in for probably a $150, which means you're paying $850.”
Baker provides specific numbers showing Apple's effective price is $600 versus Android's $850 after trade-ins.
“So Apple can charge the consumer more than its competitors, but actually have a lower effective price to the consumer.”
Baker argues used iPhone resale value is critically important to Apple's business model and pricing power.
“One is, I think the price to used iPhones is critically important to Apple's business model. Why is that? Used iPhones retain their value much better than used Android phones.”
Baker recounts how Sunu Kalra's simple iPod vs Walkman comparison gave him conviction to hold Apple long-term.
“And as soon as I heard that, it's like, wow. It really doesn't matter. Apple went on to be seven x, 10 x, 15 x from there.”