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On the Hot Seat

Making ‘re-commerce’ second nature

Israel Ganot, chief executive, Second Rotation Inc.

Jodi Hilton for the Boston Globe

Israel Ganot, chief executive, Second Rotation Inc.

While millions line up to buy Apple Inc.’s new iPhone 4S, Israel Ganot is shopping for old iPhone 4 and 3GS handsets. Ganot is chief executive and cofounder of Boston’s Second Rotation Inc., whose Gazelle.com service lets owners of used electronic devices trade them in for cash. Gazelle then resells the devices - a process Ganot calls “re-commerce.’’ Boston Globe reporter Hiawatha Bray recently spoke with Ganot about the growing market for used gadgets.

Is the launch of a new iPhone a big deal at Gazelle?

The vision of Gazelle has always been about changing the way we consume electronics, the way we buy, the way we use it, the way we sell, the way we recycle. And the iPhone specifically and Apple products in general have always been a tremendous opportunity for us to get the word out about the concept of re-commerce.

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You can buy the new device just like you buy a new car. You introduce the old device that is no longer of use to you into the secondary market, and extend the lifecycle of the product. It’s greener. It’s a more holistic way of consuming products, which is our vision.

How long have you been at it?

Just over three years. We launched Gazelle just before the recession started. That was very interesting timing for a lot of reasons. Actually, it was an important driver behind our growth.

We got into this mode where we buy all the new stuff, we use it for a couple of years, and then we shove it in the drawer, shove it in the closet, and forget about those items. So our biggest competition is inertia.

That’s where the recession comes in. We tell you hey, we’ll pay you cash for stuff you don’t need any more because you upgraded to get new stuff. By the way, you need the cash to pay your electric bill or your mortgage. As a result, that became a great motivator for consumers to get off the couch and transact.

Why isn’t the company profitable yet?

We are investing significantly now in marketing and technology to build the business. This is a multi-billion-dollar opportunity. We’re building a new space.

Your ads are appearing on college football games. Isn’t that very expensive?

At the end of the day, our biggest challenge is to tell the world that re-commerce is a viable option. TV is a pretty good channel to get the word out to the masses. As long as we get the return on the investment, it really doesn’t matter how much it costs.

How much of a surge are you seeing thanks to the new iPhone?

Leading into the announcement, we’ve seen a record number of people trading in their phones. We got something like 10,000 trade-ins leading into the announcement. It’s actually accelerated since then.

Do other devices have this kind of impact on your sales?

The only other time we’ve seen it was the iPad, when the iPad 2 came out. BlackBerrys, Androids, from a quantity point of view, it’s significant volumes for us. But it doesn’t spike. It’s consistent growth, which we like better.

How about the discontinued Hewlett-Packard TouchPad tablet?

That’s a good question. I think we started paying a penny for it. It’s not worth a whole lot.

You’re facing a growing list of competitors. How do you fend them off?

Less than 1 percent of consumers trade in their electronics when they buy new, compared to the car business, which is about 40 to 50 percent. There’s massive opportunity to increase consumer adoption of the concept.

We’re the only company in our space that’s trying to build a direct-to-consumer business, trying to build a brand, to make Gazelle to re-commerce what Amazon is to e-commerce. We’ve raised $46 million in capital, and we’re using it as a competitive weapon, to invest in areas we need to invest in, to differentiate ourselves. When you look at the other competition in this space, nobody can even get close to us in terms of volume.

Hiawatha Bray can be reached at bray@globe.com.
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