iPhone Lust Revives Underground U.S. Market Joining China

SHAFAQNA – The Craigslist ad is direct: “I’ve got what you’re looking for — 10 prime new-in-box iPhone 6 Plus!”The price for the phone without a contract was for as little as $1,300, though bulk pricing may be possible, according to the ad posted this week by someone claiming to be in San Jose, California. That’s $451 more than a similarly equipped 64-gigabyte model sold by Apple Inc. (AAPL:US)

“You name a public place in the South Bay, and I’ll meet you there anytime,” wrote the poster, who didn’t respond to a request for comment. “Please do not be more than 5 minutes late. CASH ONLY.”

The ad is one of more than 1,000 on Craigslist for the iPhone 6 Plus in the San Francisco Bay Area. In New York, Chicago, and other cities across the U.S., hundreds of other ads also offered the latest big Apple phone, which went on sale on Sept. 19 in 10 countries and have since been in such high demand that the Cupertino, California-based company faces inventory challenges.

The ads show how the U.S. has joined China as a place where the secondary market for iPhones is alive and well. Yet while China’s gray market is thriving because the new iPhones aren’t available there — China wasn’t one of the countries to get the handsets last week — the U.S. secondary market is being driven by a lack of inventory, with people willing to pay up for convenience, said Carl Howe, an analyst with 451 Research LLC. Some U.S. buyers are also making purchases to resell the products later to Chinese acquirers, he said.

Profit Opportunity

“Supplies are limited and some people don’t want to take the time to actually go to a store,” Howe said. “Further, the gray market for phones in China runs as high as $3,000 for an iPhone 6 Plus, so even at $1,000, opportunists can make a profit.”

Apple said this week it sold a record of more than 10 million iPhones the first weekend that its two new versions hit stores. The models feature larger screens, which are popular in China since many consumers rely on a smartphone instead of a laptop or desktop computer. The iPhone 6 has a 4.7-inch (11.9-centimeter) display, while the iPhone 6 Plus has a 5.5-inch screen.

Nick Leahy, a spokesman at Apple, didn’t respond to a request for comment.

EBay Orders

In a sign of how the U.S. secondary iPhone market is thriving, more than 4,400 iPhone 6 and 6 Plus devices have been sold on EBay Inc. (EBAY:US) since Sept. 20 through yesterday for an average price of $1,060, according to an analysis by e-commerce market analytics firm Terapeak Inc. That’s on pace to exceed secondhand sales of the iPhone 5s and 5c last year, according to Terapeak.

“The trend line right now over the last three days has jumped up around 75 percent in terms of sales,” said Aron Hsiao, an analyst with Palo Alto, California-based Terapeak. This suggests “the iPhone 6 launch is going to be not just bigger but much bigger.”

Those willing to sell their iPhones to China are set to find voracious demand. An estimated 500,000 units of the new iPhones have already been smuggled into China, Jun Zhang, an analyst at Rosenblatt Securities Inc., said in an e-mail.

As many as 5 million new iPhones may be smuggled into China before the new models are officially available, according to Neil Shah, Mumbai-based research director for devices at Counterpoint Technology Market Research.

Alarming Interest

“There is an alarming interest in the new iPhone 6 series to be bought internationally” given that Apple has added support for a wider range of international wireless networks in the new models, Shah said. That makes it easier “for international versions of iPhones to proliferate into China,” he added.

With no official date for release of the new iPhones in China, black market vendors outside Apple’s flagship store in Beijing’s Sanlitun shopping area were selling the new iPhones at almost double the list price this week.

Buyers overseas looking to feed that demand triggered a fistfight in line at an Apple outlet near Yale University in New Haven, Connecticut this week, according to the city’s police department. The company limits buyers to two devices per visit.

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