iPhone Reselling, Why it Will Fail.

By Richard Menta 6/30/07

Last night I spoke with three college students who led the line for the iPhone at the Menlo Park Mall in NJ. They had no problem telling me they waited online for 11 hours, because they hoped to profit by flipping the two iPhones they each planned to acquire that night on eBay. In their minds they thought of those who profited from Playstation 3 flipping last holiday season and wanted to repeat their success. I didn't tell them I knew they were in for some disappointment.

Why? The reason is that for there to be a black market there has to be a shortage. For example, ticket scalpers do well, because they know there is a finite supply of concert seats for a venue at a particular night, usually the only night that artist performs in the area. As long as demand exceeds supply they will make money.

Sony's Playstation 3 would not face any shortage in the long run, because overall Sony would produce as many as needed. The supply was not finite, but infinite. But, the first Playstation 3 consoles were released just before the Christmas holiday and if you wanted one as a gift for under the tree, then the number available before Santa arrived was finite. Game scalpers got on store lines and made a tidy profit

And the iPhone? Without a holiday to place a time parameter on when one must acquire it the supply is effectively infinite. Sure, customers whose contracts end this month have reason to switch over their numbers quickly, but they can always bridge their existing service on a month-to-month basis if the first wave of iPhones sell out. Chances are Apple will catch up with demand relatively quickly.

That's why I do not expect the iPhone opportunists to succeed.


Apple Store rep at Menlo Park Mall in Edison, NJ watches the crowd 10 minutes before they open the gates to sell the iPhone.

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