The point of mobile device upgrade is an exciting time for a consumer. It means no longer having to put up with an old smartphone that is slow, has a battery life of about three hours, and displays the dreaded ‘storage full’ message every time they go to take a picture, or download a song.
And while a consumer decides which new device to upgrade to, which color device to opt for, and the accessories they want to go with it, their old device is quickly forgotten about. Consumers will use a trade-in program as an opportunity to get money off a new device, and not much thought is given to what happens to that device after it’s been traded in.
So, what actually does happen to a device after trade-in?
Devices acquired through a trade-in program go through an initial inspection to ensure they can be powered on and assess any physical damage. All customer data is cleared along with SIM and memory cards removed and shredded. The devices will then go through a more in-depth testing to confirm critical device features are in working order. Based on these tests, each device is given a ‘grade’ and prepared to be sold to go on to a second life.
The majority of pre-owned devices will live a second life in an emerging market. Smartphones are often the only access to the internet that people in third world countries have, but new devices can be financially prohibitive. Pre-owned devices are more affordable and help drive digital inclusion in underserved parts of the world. Many of the pre-owned devices go through large wholesale hubs in Hong Kong and Dubai before making their way to other parts of the world.
Yet, some emerging markets, such as India have limited pre-owned devices from being imported into their country. However, Apple is attempting to change the game in India with its renewed device strategy in order to target the 1 billion mobile subscribers in the region.
The Indian government has been working alongside the OEM, where certain restrictions are being lifted to allow Apple to sell pre-owned devices across the country, and talks are in place to allow the OEM to open its first store. Furthermore, Apple was also given assembly and manufacturing rights to drive local production and stimulate smartphone take up—highlighting the transformative impact that the sale of smartphones whether new or pre-owned can have in emerging markets and on driving digital inclusion, along with its ability to boost GDP through greater productivity and efficiency gains.
And the rest?
So where do the remaining pre-owned devices end up? Well, these actually remain in the North American market.
It may come as a surprise to many, but the market for refurbished smartphones is actually growing faster than the market for new smartphones. According to Counterpoint’s Refurbished Smartphone tracker, the global market for refurbished smartphones grew 13% year on year in 2017, reaching close to 140 million units. This was in contrast to the global new smartphone market, which grew by just 3%. So where is this demand coming from?
A lot of refurbished devices are being used for insurance purposes. More and more, we are seeing mobile operators hold on to the devices they take back from consumers as part of trade-in programs, and they are using these devices to support their insurance and warranty offerings. This is a great cost saving exercise—giving a consumer a pre-owned, refurbished device when they make a claim on their insurance is far cheaper than giving that customer a brand-new device.