Gazelle Boosts Its Bottom Line by Keeping Your Gadgets Out of Landfills

Gazelle, a hot web service benefits its bottom line by keeping your old consumer electronics out of landfills.

1. Americans have an average of 10 pieces of unused electronic equipment. Gazelle.com's business is taking those old cell phones, pocket digital cameras, and other stray devices and either giving them a second life or disposing of them properly. Would-be sellers ready to clean house can look up more than 250,000 models in some 20 categories, including laptops, digital cameras, and most recently, e-readers, on gazelle.com. "We want to make trade-ins more appealing and more common," says CEO and cofounder Israel Ganot, who expects his business to triple in 2010 to approximately $25 million in revenue.

2. The Service Uses its patent-pending calculator technology to develop an offer price for each item. It takes data such as condition — Does it turn on? Are all the cables with it? — as well as demand for that device on eBay or Amazon to help determine an offer. The site has a graph that explains the product's current value and where it's headed (to zero dollars, sooner than you'd like).

3. Accept the Offer — $97 for a Nikon Coolpix S4000! — and Gazelle pays for the shipping. It encourages customers to toss old gadgets with no resale value into the box for recycling. Customers choose to be paid by check, PayPal, Amazon or Walmart gift card, or to donate the money to charity. Roughly 80% ask for a check.

4. Gazelle Receives the box and determines if the customer correctly reported the item's condition. About 15% to 20% of offers are revised at this stage — up and down. It then pays the customer within a few days.

About 80% of products are in great condition and Gazelle sells them itself on eBay and Amazon. "There's a tremendous demand for inventory that has more life in it," Ganot says. More than 200,000 items have been traded in, and Ganot reports "gross margins in the 20s," similar, he says, to Amazon.

Say That Coolpix camera was pretty dinged up and got only a $2 offer. Very old or poor-quality products are refurbished and sold in bulk into emerging markets to extend their usefulness. About 10% of the products Gazelle handles fall into this category.

The Dregs — items that received no offer but got thrown into the box — are properly recycled. "We don't want to make a penny in recycling," Ganot says, calling it a brand decision.

What's Next for Gazelle is generating greater awareness for what it calls "recommerce." Less than 1% of electronics have a life beyond their first owner. To boost that number, the company is behind the trade-in offers that Walmart, Costco, Office Depot, and other big-box retailers make on their websites. It has also experimented with in-store promotions, where products can be evaluated and traded in for store credit. "The used electronics market is $10 billion on eBay alone," Ganot says. "There's unlimited potential." As long as there are early adopters — and folks interested in second-generation goods — he's right.

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