Why retailers are moving into the Second-Hand Phone Market

One reason why used mobile phone sales have rocketed is that the market has gone ‘mainstream’. In other words, it has become a process familiar to most people and is regarded as normal and routine. It’s astonishing to think that just ten years ago there was nothing like a formal structured second- hand resale market at all.

What took place was largely peer-to-peer trading on remote obscure sites, with the occasional entrepreneur stepping in to scoop up bulk purchases of unwanted devices cheaply in online auctions in order to sell them at a profit on the same platforms.

As smartphones started to make an appearance, the margins on pre-owned mobiles increased and trading began to take place in earnest on larger more prominent sites such as eBay and Gumtree. The early online entrepreneurs then developed the first examples of second-hand phone stores. These usually sold used handsets along with other value-added services such as repairs and device unlocking. But the situation remained fairly informal and a niche market in terms of the wider supply chain.

Now, over the last three years, the market has turned on its head. Used smartphones are sold alongside new handsets in the same mainstream marketplaces. The premier manufacturers, including Apple and Samsung, now sell refurbished devices they have taken back in exchange for new handsets.

Argos and airtime dealer GiffGaff sell refurbished phones because they are responding to consumer demands. And just as sales of pre-owned devices have grown, the average price paid for such a phone has steadily declined. Retailers are meeting cost-conscious consumers’ demands by offering used and refurbished smartphones at a fraction of the cost of new handsets.

Quality guaranteed

But value is not the only consideration. Consumers and retailers must have confidence in the product, so that regardless of cost, the device meets certain specifications in terms of quality, working order and a reasonable future lifespan. And this is where the coming-of-age of the supply chain is relevant.

These days, a retailer wishing to sell pre-owned mobiles does not have to watch out for online auctions and source stock from dubious resellers with little idea of what they are buying in terms of quality. They can either source stock from the public or buy from a professional, large-scale wholesale supplier in whatever quantities they require.

What’s more, because the second-hand phone market has been regularised and professionalised, every pre-owned phone is tested and graded, thereby guaranteeing a minimum standard of quality, and will be awarded an appropriate retail price point. Some phones can even be refurbished to as-new condition. The larger wholesalers enjoy substantial economies of scale through bulk-purchasing used phones, which means handsets can be sold to retailers at prices which allow plenty of room for higher margins.

Online and high street retailers, airtime dealers, device manufacturers and vendors all derive benefits from selling second-hand mobile phones. The main ones are:

Higher margins

Flagship smartphones are eye-wateringly expensive to buy new.  Manufacturers such as Apple and Samsung understand full well their value and keep a tight grip on the market. And as they also operate their own direct-to-consumer retail systems, these big brand producers have little incentive to give any favours to other retailers. Consequently, they keep wholesale prices high, resulting in squeezed margins for retailers.

In the used smartphone sector, there is no stranglehold on or monopoly of the market. The typical source of a used device is the owner, who is usually content to get something back for an old handset, including a part-exchange deal on a new device. The low starting point creates value throughout the supply chain and at the top, retailers can buy used handsets at considerably lower prices than their typical RRP.

Greater value

Any market depends as much on supply as demand. In the used phone sector, supply relies on encouraging consumers to trade in or sell their old devices instead of putting them away in a drawer or throwing them away. A steady growth in the value of pre-owned handsets has helped encourage increasing numbers of consumers to sell their old phones. Getting a good price for a device that’s no longer wanted maximises the value of the original purchase.

For the retailer too, selling second-hand handsets involves them in a continuous cycle. Modern smartphones are sufficiently sturdy to last through three or four owners. So each time a pre-owned phone is sold, another opportunity arises for it to return and make a profit again. These cycles could also result in increased consumer activity. If owners know they can obtain a good price for their handset, they will be inclined to change their devices more often, stimulating the replacement cycle.

Greener business model

Recycling and reducing waste is now a major concern that increasingly affects how consumers make purchasing decisions. Maximising the longevity of mobile phones through second-hand trade reduces their environmental impact. There is no sense in throwing away a handset in perfect working order to be replaced by a new model. And the more the demand for brand new devices can be slowed by recycling used phones, the less energy and fewer materials will be consumed making new ones. Stocking second-hand mobiles meets this concern. A company such as ineedamobile.com buys and sells second-hand phones, tablets and watches and has traded successfully for ten years.