The market for used and refurbished smartphones has witnessed rapid growth over the past several years.
The used smartphone market has grown five times faster than the overall smartphone market. The growth in the market for used phones is due in part to increased awareness among consumers about trade-in programs offered by carriers and cell-phone resellers, including Swappa and Gazelle, as well as increased resales on consumer marketplaces like eBay and Amazon.
Within the United States, most major carriers, as well as in-store and online retailers have implemented some type of trade-in strategy to purchase used devices. These types of programs have also appeared in Western Europe and Asia over the past three to five years.
Apple recently started selling refurbished iPhones in the U.S. through their website. Wireless customers have long had the opportunity to buy used iPhones from their carriers and other retailers. However, the fact that Apple is now offering the devices direct is noteworthy. It reflects both the maturing nature of the new phone market and Apple’s desire to put the iPhone into the hands of budget constrained smartphone buyers and their ability to make a profit doing so.
Apple’s decision is based in part in the realization that the smartphone market is changing more slowly than it had in the past, and its ability to deliver major innovations every two years has been hampered.
“This rise in smartphone reuse will impact not only the sales of new units, but also the revenue streams of all those involved in the smartphone supply chain,” notes analyst Meike Escherich in a statement. “Stakeholders that are already participating in buyback or trade-in programs need to have a strategy for turning used devices into a positive asset.”
Just a few years ago, the United States smartphone market was almost entirely subsidy-driven, which meant that few people actually knew how much a smartphone cost. What they knew was that roughly every two years they could pay $200 down to their carrier and get a new smartphone. When U.S. carriers began to move away from the subsidy model, many people were shocked to realize that they were paying upward of $600 or $700 over the lifetime of that phone. As that realization took hold, the market began to bring forward a long list of new financing options.
Smartphone vendors also benefit from this thriving secondhand market. Encouraging an annual replacement cycle increases annual sales. And the availability of a formal secondhand market makes devices more affordable to customers.
As a result, the used smartphone market has forced manufactures to cutback on device production. This is largely due to the lack of innovative features that doesn’t justify the hefty price tag of newly released products. Consumers are holding on to their devices for longer periods because they no longer see the cost value. Couple this with a budget-conscious consumer due to economic turbulence, makes the rise in the secondary smartphone market inevitable.
Bottom line: secondhand smartphones will be increasingly dominating the market as high end devices can be offered to mid-market buyers at a lower price that meets their budget.