Mobile phones have become so ubiquitous that it feels like pretty much everyone we know has one. And today there are different levels of phones on the market – from prepaid phones that cost less than $100 to the latest OLED, bezel-free phones that run well over $1,000. And for the most part, we’ve grown accustomed to the year-over-year explosive growth of new mobile devices. But now, a lack of mobile sales has resulted in a plateaued market and consumers are starting to turn towards the second-hand market.
Persistence Marketing Research (PMR) forecasts 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 8.9 percent CAGR from 2017 to 2025.
The affordability of used and refurbished devices is also heavily supporting the growth of the second-hand mobile market. Because of this, we’re seeing a widening gap in the market that has all but eliminated middle price brand handsets. 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, while brands like Honda essentially did not exist.
Another reason why second-hand phones sales are seeing a boost is due to the green initiative movement. As more technology is introduced, the more people feel inclined — or at least begin to think about — the current waste crisis. Groups and organizations such as the EPA and RLA have improved recent efforts to standardize cosmetic grading, which is pushing e-recycling.
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 a second-hand device. 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.
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.
And given the state of the state of the mobile market overall, 2019 will be a pivotal year for mobile retailers and processors.