Real Redial

0



Flipswap Inc.


Founded:

November 2004


Core Business:

Providing fully outsourced cell phone trade-in service for wireless retailers


Employees in 2006:

7


Employees in 2007:

25

Goal: To be the No. 1 trade-in provider for cell phones and other portable electronics


Driving Force:

The desire of consumers and retailers to receive a return on used or obsolete cell phones and other electronic devices


By BOOYEON LEE


Staff Reporter


Six young bachelors, who live together in two neighboring Hermosa Beach houses, are running a $12 million business offering cash and store vouchers for used cell phones across the country.


Most people are happy just to get rid of their two-year-old phone when they get a slick new handset. Instead of throwing old phones in the recycling box, Flipswap Inc. enables wireless retailers to give the customer a gift card with the trade-in value that the customer can use in the store. Or the customer can get a stamped package to drop the old phone in the mail themselves and get cash back.


Mom-and-pop cell phone trade-in businesses are nothing new, especially in the world of e-commerce. What makes Torrance-based Flipswap unique is its software technology, which is currently applied to 2,500 wireless retailers with 10,000 more stores in the pipeline.


The Web-based application allows wireless retailers to offer store credit upfront on any type of phones customers bring in.


“Our service is completely agnostic in terms of carriers. Someone with a Cingular phone can walk into a Verizon store and get store credit. It fits perfectly with the goal of every carrier to get someone to jump ship from a competing carrier,” said Sohrob Farudi, 30, the company’s chief executive.


Flipswap’s Web application can spit out a trade-in value in minutes based on a handful of questions: Is the power on? Is the phone water-damaged? Is the screen intact? Type in a model number and phone type and the Web site gives a price. A trade-in value for a 14-month-old Motorola Razor, for example, is $50.


The customer gets a $50 gift card and the store gets that money back from Flipswap within 30 days.


“It’s a way to recoup money,” said Jodi Robbins, a returns department manager at Simply Wireless, which operates 100 wireless stores on the East Coast. “Previously, we tried to sell them out to small dealers selling in small quantities. But the phones piled up pretty quickly.”


Simply Wireless ships up to 6,000 phones a month to Flipswap, and recovers about 50 percent of the value of the phone. These are phones that are returned to the stores or arrive defective from wholesalers.


They don’t include old cell phones of customers because Simply Wireless doesn’t issue credit for trade-ins. Its retailers give customers Flipswap’s pre-paid packages for them to mail their old phones directly to Flipswap in exchange for a check in the mail.


Long before the retailers send Flipswap boxes of old phones, Flipswap has already sold those phones at a profit to a South American wholesaler, who has placed bids on phones based on model numbers and phone type.


“It sounds to me more like a real-time auction,” said Derek Kerton, principal analyst of the Kerton Group, a wireless telecom consulting company.


“That’s very innovative in the cell phone space, especially if it’s integrated into the point-of-sales presence.”



To survive, scalability

This spring, Flipswap secured contracts with five major wireless point-of-sales providers IQ Metrics, WorkWireless POS, TeleTracker Online, Master Merchant Systems, and CellSell Accounting Systems which are integrating Flipswap’s software into cash registers at 10,000 wireless stores.


Kerton said the young company has picked the right market. About 1.2 billion phones get retired every year around the world, according to the Kerton Group. More than 150 million are forgotten in the closet or recycled in the United States.


“Regrettably, a lot of phone end up in a drawer after 18 months of use,” Kerton said. “People can’t throw it away because it still looks like something of value. I can’t give it away to my nephew or cousin because they’ve already got one or can get one for free if they sign up for a new service.”


The only way a company like Flipswap could survive in the long run, however, Kerton said, is if the software is scalable.


“If they’re selling to the developing world a mixed bag of 2,000 different phones with 2,000 different models, not a lot of wholesalers can support that,” he said. “If you can aggregate 10,000 used Motorola Razors, then you’ve got something very re-sellable.”


The strength of Flipswap’s software is its scalability, Farudi said. Already, the company is the exclusive trade-in provider for InPhonic Inc., the nation’s largest online phone retailer.



To become a verb

In the long term, the company plans to expand to other electronics.


“The idea is for anyone to go to any electronic retailer with your iPod, cell phone or lap top and get instant credit for a new TV,” Farudi said. “We want people to walk up to a counter and say ‘I want to Flipswap this.’ We want our brand to become a verb.”


Farudi, his two brothers and two friends came up with this idea the summer of 2004, sitting around Farudi’s living room in Washington D.C. They were already running EZWay Auctions, an eBay drop-off store. It was a labor-intensive business and the idea of developing technology that could streamline the business model seemed attractive.


Andrew Berman, chief technology officer, 30, wrote the codes for the company’s Web application and with $75,000 in seed money from a private investor, Flipswap took over the drop-off store site in D.C.


Edo Cohen, 28, vice president of sales, recalled making his first sale at a local retailer and returning to the office to find the four men dancing around the computer watching the company’s first 16 phones get routed through its Web page.


The company’s second angel investment of $300,000 came from Los Angeles and gave the five men an opportunity move out to Southern California. They opened the Torrance business January 2006.


Cohen, a college roommate of Cyrus Farudi, chief financial officer, said they have lived together for eight years. “I’m the first one to get married,” said Cohen, whose wedding is in the fall. “It feels kind of like a divorce.”


But Cohen is upbeat. The newlyweds will move into an apartment next door to the boys.

No posts to display