By Avigayil Kadesh
When you buy a new smartphone, why put the old one in a drawer or landfill? Israel Ganot, the president and CEO of Gazelle, has an alternative that benefits your pocket and the environment, as well as customers looking for used, affordable gadgets.
Ganot co-founded Gazelle in 2008 and the company rapidly emerged as the largest re-commerce site for consumers to trade in electronics for cash.
Born in Lima to Israeli parents, Ganot spent a happy childhood in Bat Yam, south of Tel Aviv. After high school, his family moved to New York, and Ganot put himself through New York University by working for an Israeli-owned video rental and consumer electronics store in Manhattan. Many of the store’s regular customers were Wall Street execs, inspiring Ganot to major in finance. After his 1994 graduation, he worked at Harvard Business School for a year doing case writing.
“One of the cases was about Microsoft, and it entailed going to Seattle and meeting Bill Gates,” Ganot relates. “It planted a seed when he talked about technology and how it’s changing people’s lives -- about how the world is getting transformed.”
In 2000, armed with a master’s in business administration from Harvard, Ganot joined eBay and worked for six years in finance roles on the e-tailer’s international extension and PayPal division.
“I saw that people were buying upgraded technology every other year and the pace of innovation was really accelerating, even before iPhones,” he says. “Now, what do we do with the old devices? Sell them on eBay or Craigslist? Very few people do that, because it’s fraught with risk, fraud and hassle. So they usually put it in a drawer and forget about it. Few appreciate how much value is left in the old device.”
Don’t just sell it – Gazelle it
Ganot himself tried to trade in a couple of last-generation BlackBerrys at a retailer. “They offered to recycle it for me for 20 bucks, and a light bulb went off in my head. Nobody will pay for the privilege of recycling if there’s value in the device,” he says.
“One of my co-founders had experience in the car industry, where trade-ins are the norm, and we wanted to bring re-commerce to the consumer electronic space.”
In July 2006, he co-founded Second Rotation, targeting the business-to-business market.
“Our idea was to partner with retailers and have them promote the service, but that strategy didn’t work since retailers weren’t as passionate about it as we were. So we went direct to consumer.”
In 2008, they revamped and renamed the business Gazelle. It’s a short, memorable word that conjures images of a fast animal in nature, and lends itself to being used as a verb, as in “Don’t just sell it -- Gazelle it.”
The trio did a bit of consumer education, and the idea took off like a gazelle.
One of the fastest-growing companies in the United States, Gazelle has been listed on the Inc. 500 for three years in a row. It’s received more than 1 million gadget trade-ins and employs 65 people in Boston’s Innovation District. To date, Gazelle has paid out more than $80 million in cash to more than 500,000 customers – many of them repeat customers.
“We demonstrate an easy, safe, fast way to get the value out of the old device and get more holistic use out of the product. We move it from early adopters to developing markets, where there is insatiable demand for these products,” says Ganot, a frequently quoted e-commerce and re-commerce expert for the Wall Street Journal, CNBC and Forbes.
The average Gazelle customer receives $175 in cash per trade-in. “The number one category is smartphones, and within that the iPhone is the dominant brand followed by Samsung and BlackBerries,” Ganot reports. “Outside of that, the fastest-growing category for us is the iPad.”
Gazelle pledges to wipe the personal data from traded-in devices, removing the main obstacle in customers’ willingness to recycle their gadgets.
Simple, seamless process
The traded-in devices are sold to a variety of buyers, primarily wholesalers in emerging markets in Asia and Latin America. “They buy in bulk and redistribute where otherwise these products are not accessible,” says Ganot. “There are huge shortages of Apple products in developed markets so it’s even worse in places like China.”
He explains that the price of an iPhone purchased through a wireless carrier in the United States is heavily subsidized. “A $200 iPhone has an intrinsic value of $700 or $800. In China it could cost as much as $1,500, and very few can afford to pay that kind of money. A traded-in, last-generation model can be bought for $200 or 300.”
Gazelle also sells some of its inventory on eBay and Amazon to consumers looking for used products, and to insurance companies that need a stock of devices to provide clients with temporary replacements for lost or stolen phones.
“The space is growing really fast, with a lot of players,” Ganot acknowledges. “eBay and Amazon have their own trade-in programs, as do wireless carriers in the US, Europe and Asia. I got a call six months ago from an entrepreneur in Israel looking to replicate the model there.” Of course, he offered the fellow Israeli free advice.
Still, Ganot says Gazelle runs ahead of the pack. “In the context of the US, our differentiation is that we offer, by far, the best customer experience. We provide a simple, fast seamless process. You look up the item, we give you a quote, and if you like it, we send you packaging, we pay shipping, and you get paid right away. We offer cash instead of store credit, and people prefer that.”
“We think about building our brand the way Zappos did for shoes, by wowing our customers,” says Ganot. “Word of mouth is our top way to get new customers. We double the business year after year, and we don’t see an end in sight.”