Real Competition for the iPod

So far, nobody seems to have launched a serious challenge to the iPod (although I recently saw some Samsung models that come close to matching it on design).  So perhaps the biggest threat to Apple will be the growing number of used iPods.  Apparently, thirty percent of iPod purchases are from repeat buyers, meaning lots of unused iPods are hitting the secondary market:

Small Dog Electronics, for instance, is an established Apple reseller that has for years sold refurbished Macintosh computers and other accessories. The company now sells around 500 used and refurbished iPods per month from its Web-based store at significant discounts. A refurbished third-generation, 30GB iPod that cost $400 in 2003 now runs for about $210, for example.

The company offers up to $100 off the price of a new iPod to anyone trading in a used one. According to CEO Don Mayer, the pace of such replacements is expected to increase as iPod sales continue to grow.

"You have a curve that's getting larger every quarter for the installed base of iPods," he says, "so the used and refurbished ones are getting more and more prevalent. All that increases with volume."

Apple's strategy has smartly been to out-innovate itself, make their own products out-of-date, before a competitor can do so, but the growing number of used iPods, may be downside of this strategy.  There's probably nothing to be alarmed about yet, but it will be interesting to see how this unfolds.

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