By Satanik Roy
A few years ago, many thought it unthinkable for the refurbished phones market to grow to the size that it has today. As early as 2013, there were rumors about the emerging interest in used phones. But too many were skeptical about the refurbished smartphone market then, and the trend was dismissed as a passing fad. But sure enough, the market continued to grow, and just three years later Deloitte declared that it had become a $17 billion global market in 2016.
By the end of 2017, the market was worth roughly $19 billion, and the updated five-year forecast from IDC reports that it would continue to grow at a year-on-year rate of 10% through 2022, which is a modest estimate at best.
India’s appetite for refurbished or second-hand smartphones is set to grow in the next two years, alongside the expanding market for new phones, driven by demand for aspirational brands such as Apple and Samsung at heavily discounted prices.
The refurbished mobile phone segment of Amazon alone has grown by 400 per cent year-on-year. Around 12 million refurbished smartphone units were sold in India in 2017 alone. World's biggest smartphone manufacturers Apple and Samsung accounted for around 33 per cent of these sales, says Counter-point Technology Market Research. In volume terms, the segment grew 25 per cent in India as compared to 13 per cent across the globe.
There are multiple reasons for this trend, but experts point to three major causes:
Longer upgrade cycles
Upgrade cycles are getting longer at a rate faster than they had been previously predicted. Whereas mature used smartphone markets used to have cycles 24–25 months long, now they’re closer to 27 months and 28 months.
Right-to-Repair
The Right-to-Repair movement has steadily been gaining momentum over the past few years, but it has begun picking up steam at a faster rate lately. The consequent expansion of consumer choice with regard to repair has guaranteed that smartphones get an extended lifespan and greater use value.
Rising upgrade cost
Increased smartphone prices at the high end of the spectrum has led to many consumers holding on to their phones longer than expected. This also means that upgrading to relatively recent phones sold at a cheaper rate — i.e., refurbished smartphones — had become the more appealing option as of late.
Regions seeing the highest volume include the US and Europe. While the fastest growing markets for refurbs include Africa, SE Asia and India. All have been seeing initiatives from the major operators (e.g. Verizon, Vodafone etc.), OEMs (e.g. Apple) and major distributors (e.g. Brightstar) who are adding full life-cycle services.
The industry uses data analysis to predict future resale values of devices, which means consumers can be given a guaranteed buy-back value at various points during their ownership. This helps consumers to manage the high cost of the latest flagship smartphones – or at least to obtain a useful contribution to partially offset the cost of their next phone.
With 13% growth, refurbished smartphones are now close to 10% of the total global smartphone market. The slow growth of the new smartphone market in 2017 can be partially attributed to the growth of the refurb market. The slowdown in innovation has made two-year-old flagship smartphones comparable in design and features with the most recent mid-range phones. Therefore, the mid low-end market for new smartphones is being cannibalized by refurbished high-end phones, mostly Apple iPhones and, to a lesser extent, Samsung Galaxy smartphones.
By 2022, IDC notes that the used smartphone market will reach $52.7 billion. The introduction of new technology like 5G and the trend toward premium phones have raised prices for nearly all smartphone brands in recent years. If anything is for certain, it’s that the used smartphone market will continue to grow exponentially as second-life devices grow more poised to take a larger market share over the course of the next five years.
Views are author’s own. Satanik Roy is the Co-founder of HyperXchange, an O2O marketplace for premium refurb gadgets with lowest price guarantee, 12 month warranty and automated diagnostic and price offer for buying old phones.