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iPhone 5 Creates Trade-in Frenzy

Stocks in this article: AAPL GOOG RIMM

They're all hoping to capitalize on the multi-billion dollar used electronics space that has consumers scrambling to ditch their old gadgets as quickly as possible for newer and shinier products.

This mad rush has resounded with the iPhone in particular, which has seen a surge of people looking to replace their phones even before their contracts are up.

"Apple has the most demand from phones off the upgrade cycle because of the brand they're built and its ability to resonate with consumers," said James Ragan, an analyst with Crowell, Weedon & Co. "The early adopters just need to have something."

According to a recent study by mobile ad network InMobi, 41% of mobile users in North America plan to buy an iPhone 5. This figure incudes over half of current iPhone customers.

To accommodate this swell in demand, Gazelle rolled out two weeks ago a so-called "red carpet" experience for customers to sell their iPhones, which includes a mobile app, a special iPhone processing team and a concierge customer care group answering questions about SIM card removal and hacking.

Once customers receive a quote for the items they're looking to sell, they'll get a free shipping label from Gazelle. After Gazelle receives the item, the gadget is inspected and personal data deleted. The company aims to send a check to consumers within a week. It then resells the items on marketplaces such as Amazon (AMZN) and eBay (EBAY), as well as wholesale partners.

Sites like Gazelle make swapping phones easier -- and safer -- than ever for consumers who might ordinarily turn to unmonitored marketplaces like Craigslist, Scarsella said.

"In the past, you'd have to know how to list your products, wait to get paid and go meet some random guy somewhere," he said. "It's not secure, not safe and not fast."

In a sign of confidence in the sector, Gazelle announced a $22 million funding round in July.

"Tech product cycles for years have been getting shorter and shorter and carrying the latest and greatest gadgets is a status symbol," said Mike Tyrell, a partner with Venrock Associates and a member of Gazelle's board of directors. "We're trying to make trading in an old iPhone to get an iPhone 5 Netflix (NFLX) simple."

-- Written by Olivia Oran in New York.

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