YOU ARE AT:DevicesMobile phone afterlife—why the second-hand market will be all the rage in...

Mobile phone afterlife—why the second-hand market will be all the rage in 2019 (Reader Forum)

Mobile phones have become so ubiquitous that it appears everyone has one. Today, there are all different levels of phones on the market—from prepaid phones that cost under $100 to the latest Apple devices that run well over $1000. We’ve become accustomed to the year-over-year explosive growth of new mobile device sales at all prices—until  recently. A new trend is emerging as mobile technology matures and sales decline, with some predicting that the market has plateaued. As the sales of new devices decline, a new second-hand market is growing. This market, which is comprised of used devices that are still technically viable and made ready for resale after any remaining owner data or diagnostic issues are addressed by mobile processors, resellers and retailers, is opening potential growth opportunities for the year ahead. To understand how we got here and where we go from here, let’s take a closer look at this trend.

Growth of the second-hand mobile market 

Persistence Marketing Research (PMR) forecasts that the second-hand market is going to reach approximately 39 billion dollars in 2025 in global revenue, up from almost 20 billion in 2017. PMR’s recent report estimates the global refurbished and used mobile phone market will expand by 8.9 percent CAGR from 2017 to 2025. The company also projects that “…sales of refurbished and used mobile phones in company-owned and consumer-owned markets will collectively account for 277 [million] units by 2025-end.” That’s a number worth paying attention to. Some research firms are even more bullish on growth, including Bertrand Grau, a technology analyst at Deloitte, who forecasts sales of second- hand mobile phones will expand by 20 percent a year between 2015 and 2020.

Price drives behavior

The affordability of used and refurbished devices—especially in relation to the rising cost of the new devices—is supporting the growth of the second-hand mobile market. There is a gap forming in the mid-market that second-hand phones, barring issues with erasure and repair, can help fill. We’ve seen the market options for customers shift to almost eradicate the middle price band of phones. Ryan Reith, program vice-president at IDC, compares the current U.S. cell phone market to an auto market in which the majority of consumers either bought a Mercedes or a Kia, and brands like Honda essentially didn’t exist.

Part of the cost equation for some customers is influenced by the desire to create less waste. Groups such as the EPA, RLA, and evenCTIA with their recent efforts to standardize on cosmetic grading, are leading a push to recycle and make better use of mobile technology. As the push to go green expands we will see more customers choose used phones. (Source: Forbes)

Longer smartphone lifecycles

Gone are the days where consumers would feel the need to buy a new phone every year or two. The most common reason consumers now change phones is because their current one stopped working. Consumers today are slower to upgrade their devices, leading to longer lifecycles, but also translating to a lower cost of ownership over the cost of the life of the phone when buying used (Source: Forbes). The average upgrade cycle of a smartphone in the U.S. is 32 months, according to NPD Connected Intelligence. Consulting firm Deloitte predicts that at least ten percent of smartphones purchased in 2016 will still be in use in 2020 by second or third owners. Deloitte research indicates half of those devices will be traded in for upgrades and the other half sold in the private marketplace.

Less disruption as we head towards commodity

Unlike the early days of the mobile market, we have seen less major technology breakthroughs recently, with the exception of the introduction of new augmented reality features such as iPhone X’s ability to recognize its owner’s face. But even these features are not at their full potential yet. Devices are also lasting longer and increased longevity means that we don’t have to buy new phones as often. In fact, consumers are frequently buying more features and smart phone capability than necessary with the latest models, which means that consumers can use them for longer than ever before. One possible exception on the horizon that could further boost the second-hand market will be the move to 5G as it becomes available in more markets in the next couple of years. Early adopters could sell back today’s flagship devices for tomorrow’s 5G enabled devices.

Not all devices transition easily

Unfortunately the decision to trade in and/or adopt a used device isn’t always a simple path forward. The consumer may need to consider device locks, iCloud locks, carrier locks, ownership status and removing data from their device before turning in a used phone. When it comes to sanitizing devices, the diagnostic issues that arise and even the erasure or factory reset methods needed  to prepare devices for the second-hand market varies by operating system but also by device and by the various carrier-specific firmware versions. Some carriers and resellers may opt to favor one operating system over the other. Android devices, for example, require more secure aperiodic erasure, which is the process that overwrites data with a random, instead of static, pattern; meanwhile, for iOS, devices factory reset is often sufficient. However, iPhone users should be aware that they need to disassociate their device from their iCloud account before they turn in their device. To ensure a smooth process and mitigate common issues, there are trusted third-party resources and tools available to ensure that the phones are properly erased of personal data. This may be one reason why consumers go back to smart phone carriers to turn in their devices. Aside from getting money back to put directly toward their new device, with so much to consider in transitioning devices they have some level of trust that the carrier will perform a complete data sanitization on their device.

Understanding how to serve the second-hand market in 2019 and beyond

Selling used and refurbished phones into a vibrant second-hand market comes with several direct benefits, according to Deloitte. Getting back to an annual replacement cycle among a rising number of users may boost annual sales. Opening a mid-market option with second-hand phones creates an attractive offering for their customers with smaller budgets, thus eliminating the need for further development of less profitable variants of their devices. The idea being: a used or refurbished, premium smartphone may be more appealing than lesser known or unbranded device. Lastly, there would likely be a margin in processing used phones, similar to that earned by dealers in the auto industry.

Given the state of the state of the mobile market overall, 2019 will be a pivotal year for mobile retailers and processors. Understanding how the market is changing and how devices are performing will allow these organizations to adopt the most commonly-performed diagnostic tests across Android and iOS devices, while also familiarizing them with some of the top issues that affect these devices. As part of any program to offer second-hand devices in 2019 and beyond, it is important for mobile businesses to choose solutions with a comprehensive set of mobile diagnostics tests and erasure standards. To increase customer satisfaction and ensure data privacy, industry players will need to ensure issues are found and addressed as quickly as possible and data is securely and certifiably wiped or erased, resulting in a tamper-proof diagnostics and erasure report and a happy year ahead for customer and provider alike.

ABOUT AUTHOR

Russ Ernst, EVP of Products and Technology at Blancco
Russ Ernst, EVP of Products and Technology at Blanccohttps://www.rcrwireless.com
Russ Ernst, EVP of Products and Technology at Blancco, the standard in data erasure and mobile lifecycle solutions.

Editorial Reports

White Papers

Webinars

Featured Content