PARTNER CONTENT: Sean Cleland, VP of mobile at B2B online marketplace company B-Stock (pictured), explains how the company is helping push standards into the secondary mobile phone market, and how pre-owned phone adoption will continue its growth trajectory.
What is B-Stock and what do you do?
Sean Cleland: We build and operate online auction marketplaces for the world’s largest retailers and manufacturers to sell their returned and excess merchandise to business buyers. It’s very similar to eBay except it’s all B2B and white-labelled. The mobile division of our business has grown substantially over the last few years: we currently operate marketplaces for several major carriers and OEMs such as Samsung, AT&T, and T-Mobile US. When these companies have inventory they need to sell, whether it be returns, trade-ins, overstock or accessories, they send us a breakdown of the inventory and, from there, we build that into auctions and market the auctions to our global buyer base.
How big is the secondary mobile market?
It’s tough to measure, the secondary market is a beautifully complex market with other factors such as repairs and exports to consider. The estimate is between 25 billion to 30 billion units in the US, however there is double counting which skews the figure. For example, when an operator sells inventory at auction on our platform, it will count as a secondary-market sale. But whoever buys that, refurbishes it and sells it on will count as another secondary sale, even though it’s the same device. So the supply chain still has a couple of steps to improve on, but I think it’s still a good number to represent the space.
What are the growth opportunities for resellers in the secondary market?
We see significant opportunity because OEMs and carriers are taking ownership of their returned devices and getting involved in the process. We help to enable that by giving them a platform to do these transactions in a transparent and controlled environment.
We also see an emergence worldwide. The ASPs for devices in India and China are growing, which means there will be more secondary value in the product, so trade-ins and returns are going to have more value, and will be more viable to stay in market. This means we’ll be selling higher-ASP products. So we see tremendous opportunities overseas in emerging markets where that sophistication on the reverse logistics side is relatively new.
How big will the secondary market become?
In the US, we’re seeing massive growth in pre-owned products while new sales are pretty stagnant, if not down. We’re definitely seeing greater consumer demand for pre-owned products and it’s a high margin product for retailers, carriers and OEMs.
The appetite for pre-owned devices is growing and the margin on them is fantastic. But it’s never going to get to the point where it overtakes new sales, of course. There’s always going to be someone that holds onto their device and runs it until it’s dead and then recycles it. You’re never going to get every phone ever sold back, but the market is certainly growing and it’s consumer behaviour causing this.
Customers are driving pre-owned demand because there are no more carrier subsidy programmes in the US, a model where customers are tied to long term, high monthly fee contracts. Carriers are now using trade-ins as the modern subsidy and that’s causing the secondary market to grow.
What are the challenges associated with the mobile secondary market for retailers and OEMs?
First and priority would be data clearing: they want to ensure that customer data is always protected. Those already in the secondary market have put in processes to ensure customer data is not leaking from the secondary market.
The software that supports data clearing is fantastic, there are great companies out there that build industrial-level data clearing solutions so retailers and OEMs can maintain volume, get product up and sold quickly. But above all it ensures the customers are protected.
Another challenge is transparency. Retailers and OEMs want to ensure buyers have a fair shot at all the inventory. We’re getting away from unethical sales type relationships where someone would know someone forever and would favour to sell him or her everything.
That’s why with our platform everybody has a fair shot at inventory. It’s time stamped, you put in a bid number, just like on eBay, and there’s no question about who should be awarded product, because it’s all done on a platform that removes human bias.
Why are people more open to buying pre-owned devices?
Over the last ten years the quality of pre-owned devices increased as the industry became better at grading devices. That has become even better due to US trade association the CTIA establishing standards for grading pre-owned devices in 2019. The grading standards were made in partnership with about 60 companies, including B-Stock, in the hope the industry would adopt it and improve it. Now products going to consumers are so much better graded than they used to be. There’s no question what an A-grade product is.
Price points are of course a big factor. All these top-tier smartphones are very expensive at launch and some people are fine waiting six months for a pre-owned version. Alongside that, companies are better at processing devices to make sure they’re data cleared, tested, triaged and repackaged for retail.
What is the lifecycle of a phone today?
By our estimates, an iPhone 11 is going to have three users over its lifetime on average. That’s pretty powerful. A phone’s typical lifecycle is that it gets used for six months and something happens to it. Then it gets taken back to whoever’s providing the insurance, it gets repaired and used as a replacement device for the next person that drops their phone.
So now it’s on its second user. And then probably at the end of two years it’s time for a new phone. Then it gets traded back in, then whoever’s enabling the trade-in is going to process it for another round in retail. It may go to a prepaid store or even exported to another country.
It goes through these different lifecycle changes, until eventually it’s recycled. Then it’s pulled for parts and those commodities are popped in a brand new phone. Smartphones have a nicer lifecycle these days.
What impact did the iPhone 11 have on the secondary market?
It had a big effect simply because the retail price was $699. That price had a prolific impact on the secondary market because it was widely accepted the iPhone 11 was an excellent phone at a good price point.
Customers who bought a pre-owned iPhone X or XR are most likely going to get an iPhone 11. So the prices of pre-owned versions of the X and XR took pretty big hits when the iPhone 11 started hitting the market and word was it did really well in China.
How will 5G impact the secondary market?
It’s certainly going to impact the secondary market. Everybody in telecoms is really bullish on 5G and how it’s going to change how we do things. The general consumer is not going to understand just how quick it is until they see it in person. We now live in an environment where people are not typically going into stores to buy their new phone, they’re buying online.
So how do you show an online customer just how fast 5G is? That’s tricky. I think it’s going to be a slower transition to 5G than people anticipate and the adoption will be a little more viral.
How important is data wiping and what can companies do to ensure that phones entering the secondary market are cleaned responsibly?
If you have a customer data leak it’s a PR issue for any company. There are products out there which are hard to data clear because when they come in they are so broken, it’s hard to validate. There are certainly ways to do it, but this may require sophisticated systems.
Some of our clients will restrict their B2B sales to our R2-certified companies. R2 is a certification developed for reverse logistics of electronic waste for the recycling sector, but it has a very good measure on data clearing, very specific and strict language on what can be done and what should be done with devices which still have customer data.
Many times we will sell product to R2-certified companies only and that takes the risk off the carrier or OEM because the certification is so stringent. So they can still gain a sale, get the product moving and get it to companies which have proven to be responsible by getting the certification.