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It's on! Wal-Mart ratchets up smartphone turf war

Tuesday, 10 Sep 2013 | 6:30 AM ET
Will Wal-Mart's new trade-in program encourage upgrades?
The big box store will introduce a new smartphone trade-in program which allows customers to trade-in their old electronic devices for instant credit, reports CNBC's Courtney Reagan.

Apple isn't the only big company making an iPhone announcement Tuesday. Wal-Mart has some news of its own.

The world's largest retailer unveiled a smartphone trade-in program in the U.S., just in time for the anticipated new iPhones. The move is likely to increase the competition among retailers that allow customers to swap their old phones for a credit to buy a new phone.

Starting Sept. 21 in more than 3,600 Walmart stores and Sam's Club locations, consumers can get an instant credit, ranging from $50 to $300, for the trade-in value for more than 100 smartphones. That credit will then be immediately applied to the purchase of a new smartphone. The devices need to be in good, working condition in order to qualify for the highest level of trade-in credit, as determined through an assessment with an in-store Wal-Mart associate.

"What's great about our program is the simplicity of it," said Steve Bratspies, executive vice president of general merchandise for Wal-Mart U.S. "We aren't going to be nitpicking the customer on 'Is it scratched,' or 'does it have stickers on it?' We are going to ask five really simple questions, like, 'Does it turn on? Is the screen cracked? Are the security codes removed from it?' Really basic questions."

As the wireless wars heat up, Wal-Mart is paying attention to the latest data from market researcher NPD Group that reveals 55 percent of consumers expect to trade-in a phone the next time they upgrade devices, and more importantly, 62 percent say they will consider a different retailer if it means getting a better deal on a smartphone trade-in.

Various smartphone devices are displayed for sale at a Wal-Mart Stores Inc. location in American Canyon, California.
David Paul Morris | Bloomberg | Getty Images
Various smartphone devices are displayed for sale at a Wal-Mart Stores Inc. location in American Canyon, California.

While Wal-Mart's latest quarter showed same-store sales declined at a mid-single-digit percentage rate in the overall entertainment category, wireless sales were again a standout sub-category. NPD said the retailer gained more than 350 basis points in unit share, securing it as the number one handset retailer in unit share for the quarter.

Bratspies said the trade-in program is part of Wal-Mart's strategy to continue to expand its wireless business. "For the last six, three-month increments, we have taken share in the [wireless] category each time…It continues to perform and we are going to continue to drive that business," he said.

Wal-Mart won't directly re-sell the used smartphones, but will ship the used phones to its partner CE Exchange. CE Exchange will either refurbish or recycle the traded-in smartphones. Because CE Exchange has a 100-percent recycle guarantee program, every part of the phone will be recycled.

(Read more: Wearable tech: what's next?)

As a result of this partnership, Wal-Mart said the smartphone trade-in program aligns with the retailer's sustainability goals, because it helps to responsibly recycle smartphones.

The retailer already accepts trade-ins for other electronics like MP3 players, video games, cameras, laptops and more with its "gadgets to gift cards" program.

Trade-in wars

Although the discount retailer isn't the first player to introduce a program for smartphone trade-ins, its behemoth size and scope is likely to make it a major player in the trade-in wars. Smartphone carriers, including Verizon, AT&T, Apple, and others offer trade-in programs—all are hoping to secure the sale when consumers upgrade to the next-generation device.

Apple launched its trade-in program in August. Consumers can bring in old iPhones at U.S. Apple stores for credit towards a new model.

(Read more: Apple's iPhone trade-in program to add consumer choice)

Online marketplace site eBay recently launched is "My Gadgets" website, which encourages consumers to track their electronics' value at any time to determine when the best time is to sell the device on eBay. Once the user clicks the "sell now" button, a listing is quickly created and available for eBay's 120 million active users to begin the bidding. EBay's "My Gadgets" program isn't truly a trade-in program, as eBay sellers can use the cash received for the old device for anything, not just a credit towards a new phone.

"If we look back a month ago today, at the number of listings we had for iPhone 5's, we can say that we have seen a 44 percent uptick in the number of iPhone 5's for sale on the platform," said Jeff Somers, vice president of eBay North America marketplaces. "[Consumers] are getting their items ready for sale on eBay so that they can trade-up or take advantage of new opportunities to move into a new phone by selling their phone on eBay."

An iPhone 5 is selling on eBay for an average price of $430, said Somers. Wal-Mart said the best conditioned iPhone 5 will be worth $300 trade-in credit.

Since the Apple iPhone or Samsung Galaxy smartphones are the same no matter where they are purchased, the trade-in programs will likely need to remain as competitive as the prices for the new devices.

May the best trade-in value win.

—By CNBC's Courtney Reagan. Follow her on Twitter @CourtReagan.

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