Tuesday, 22 November 2016 10:51

Refurbished smartphones a growing threat to new sales

By

While analysts speak of a mature, over-saturated smartphone market, the trade in second-hand and refurbished units has the potential to become quite a game changer.

IDC has looked at the global second-hand market and said it has the potential to become a major constraint on demand for new devices. In part, this is due to governments promoting, even requiring, re-use and recycling to reduce human and environmental health threats from the tsunami of e-waste.

While still comparatively small, the market is growing at 22.3% compound annual growth rate, from 81.3 million units in 2015 to 222.6 million in 2020. The average selling price will be US$136 by 2020.

According to Planet Green, Americans use their mobile phones for an average of 18-20 months before buying a new one. Planet Green Recycle estimates that 70% are suitable for re-use, yet just 17% are recycled.

So far the main use for refurbished phones has been as replacement devices for those who have lost a phone. Insurance companies are major purchasers. But the rising “sub-prime” credit risk customers are also substantial users.

Commercially, Uber is taking a huge volume of second-hand phones as part of its deal to supply its drivers. This trend may evolve to food delivery, couriers and more.

Will Stofega, programme director of Mobile Phones at IDC, says the used smartphone market will affect OEMs, mobile operators, and component suppliers.

“IDC has committed new resources to help customers understand and plan for this new and potentially disruptive force. Although there is a potential downside to mobile ecosystem suppliers, IDC believes that the used smartphone market also presents new opportunities to grow revenue and increase market share,” he says.

Comment

So far the biggest refurbishment market is for Apple devices, and that has, in large part, been driven by Apple’s trade back programmes to help drive new sales. It may yet live to regret that strategy.

While I see this as a threat, there are two mitigating factors.

First, internal, non-removable batteries have a life of two to four years. A two-year-old smartphone will have two more years’ life left before the cost of a battery replacement exceeds the cost of another second-hand unit.

Second, research released by the Consumer Technology Association in 2014 showed that its sample of consumers was now holding onto smartphones for over four years (the life expectancy of the device was 4.6 years). This was largely driven by the fact that, using the iPhone 6. 6S, 7, 7S as an example, there was a lack of compelling features to drive more frequent upgrades.

CTA Life expectancy

Let’s hope 2017 brings some real innovation – not more boring me-too phones.


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Ray Shaw

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Ray Shaw ray@im.com.au  has a passion for IT ever since building his first computer in 1980. He is a qualified journalist, hosted a consumer IT based radio program on ABC radio for 10 years, has developed world leading software for the events industry and is smart enough to no longer own a retail computer store!

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