Analyst figures for the preowned smartphone market show a significant increase in sales, with demand for premium models outstripping supply, but for all the industry chatter around recycling drives, what is truly driving this growth: saving cash or saving the planet?
CCS Insight reported in Q1 sales of pre-owned smartphones reached $13.3 billion, up 14 per cent year-on-year, despite being hampered by limited trade-in volumes.
Those unfamiliar with the state of the market may think these devices are changing hands for a small percentage of their new price, but the savings are actually lower than you may imagine.
At the time of writing, a 128GB Samsung Galaxy S23 is available in “pristine” condition from Vodafone UK for £785 with a monthly plan. The new equivalent costs £857, meaning a refurbished one offers a 8.4 per cent discount. That phone, though, isn’t terribly old, so you would imagine the refurbished one has been barely used.
Take an older device: the standard Apple iPhone 12, which at the oldest will have been first sold in 2020. The same retailer lists a pristine black one with 64GB at £487 compared with £595 for the new version, again for customers on a monthly plan paying for the device in its entirety upfront.
This is a slightly more chunky 18.2 per cent saving, but of course, the lower the grade of the preowned device the higher the discount compared to new.
Despite the relatively modest discounts, CCS Insight VP of research Simon Bryant told Mobile World Live the primary consumer motivation in the segment was cash savings.
“Price is definitely the main driver of this market,” he said, adding although sustainability was cited by consumers in “tick box” surveys, “when you actually look at what people are buying, there’s nothing really to suggest that sustainability is really factoring”.
He did, however, note this could change moving forward.
A more optimistic assessment of the impact of sustainability on the decisions to purchase refurbished devices was offered by Katy Medlock, UK GM of online refurbished device marketplace Back Market, though she also noted price as a heavy driver.
“The concept of refurbished electronics is at the crossroads of two global mega trends,” she said. “The first one being consumers having a higher preference for making positive environmental choices and the second being the cost of living crisis”.
“More than half of our customers tell us that they couldn’t have afforded the device that they bought if it wasn’t through buying refurbished.”
Refurbished options advertised prominently across operator and major retailer websites show a clear preference for high-end devices with some only selling Apple and premium Samsung handsets.
Bryant noted although there is high demand for premium devices, part of the reason for the lack of availability at the lower end was “an industry point” adding it “really comes down to this residual value”.
“If you’re handling stock, you’ve got to move very quickly because every month you hold that stock it starts to lose value, and if you’re not sure what the price will be when you come to sell it, you’re not going to go with it. That’s the problem with the Android space is it’s fragmented and the residual value is very poor.”
Bryant estimated Apple and premium Samsung models made-up 90 per cent to 95 per cent of the market, adding “everything else just doesn’t sell”.
Medlock said in the UK, at least, consumer “attitudes are really improving”, adding “when you said refurbished to someone a few years ago, they might automatically think used,” but players such as her company and operator drives aided faith in buying refurbished.
“The other thing you’re also seeing is that new models being released by the OEMs each year have incremental improvements,” she added. “So people are holding on to their devices and not having this obsession of upgrading to new all the time.”
CEO of refurbishment specialists Trojan Electronics James Rigg agreed current devices offer a longer potential life span: “The quality of the product is quite good these days, it’s much more reliable than it was maybe five years ago.”
However, he also pointed to issues hampering preparing smartphones for the secondary market.
Rigg called for “an improved attitude to circularity” from top manufacturers by allowing easier component swaps, pointing to a feature on recent iPhones which flag-up when a screen replacement has taken place even when a genuine part is used from a broken device.
“In many cases [on older handsets] we would harvest the screen [and other parts] from one to put on another and make two or three good phones out of a bad one, but that’s getting harder and harder,” Rigg said.
He noted as modern handsets age, screens supplied under self-repair programmes run by major manufacturers, at current rates, would cost more than the fully repaired device was worth.
So-called “part pairing” issues, especially with Apple devices, were also raised by Back Market lead refurbishment operations manager Kewin Charron.
“It’s really hard for repairers outside of Apple’s network to use their stuff in a very effective way,” he added, noting the policy “is a real shame for retro repair”.
Bryant noted CCS Insight found one of the biggest elements driving the market currently is “surplus from trade-ins in the US”, noting “that’s basically what feeds this global market”.
“You’ve got enormous surplus where basically 60 per cent to 70 per cent are exported overseas and that feeds the European market and loads of others,” Bryant expained, pointing to the composition of operator contracts in the country and a tendency to upgrade users with the latest devices at the end of the term.
“Europe is way, way, behind on the volumes they get back from customers,” he added.
While there is undoubtedly consumer demand for premium devices and retailer desire to improve trade-ins as part of sustainability drives, the experts spoken to by MWL highlighted challenges still remain, not least in how to drum-up demand and deal with lower-end and older devices.