HYLA Mobile began investing in the secondary device market in 2009. And almost a decade later, the market has become a multi-billion-dollar industry that continues to grow year on year. In fact, research from Counterpoint has shown that the fastest growing global smartphone market last year was for refurbished smartphones, which grew by 13%.
But while the pre-owned device market continues to thrive, the global smartphone market faces some challenges. Last month, it was reported that shipments of smartphones across the second quarter of 2018 were down for a third consecutive period. There are a number of factors contributing to this downturn—a lack of innovation, along with the high cost of new devices, means consumers aren’t buying new devices as often as they have done in the past. Let’s take the iPhone X for example—this model came to the market last year with a $999 price tag!
Buyback programs are a method that mobile operators can use to help drive smartphone sales. These programs essentially use the latent value from pre-owned devices to offset the cost of new devices. And these programs are a win-win all around. They make new, increasingly expensive smartphones more affordable to customers, they stimulate upgrade cycles, they reduce customer churn, and they drive revenues. They’re a model where everyone wins!
But from what I have seen in the market, European mobile operators are trailing behind US operators in initiating device buyback programs. The vast majority of the value generated by the secondary device market emanates from the US, where major carriers such as AT&T, Verizon, U.S. Cellular, T-Mobile and Sprint are making buyback a major part of their business models. While there has been some growth across the pond, it isn’t as aggressive as what we’ve seen stateside.
So what lessons can European operators learn from US operators?
Europe’s trade-in opportunity
It is clear to see that the pressure US operators face to achieve year-on-year growth is playing a huge role. In a fully penetrated market, the big five carriers have had to create innovative business models to remain competitive. The removal and reintroduction of ‘unlimited data plans’ is a perfect example of this.
Now that unlimited data is back, in the US, we are seeing operators offering a variety of new services such as connected cars and other devices, like Alexa and Google Smart Home to their portfolio to attract and maintain customers. These new offerings highlight the ongoing battle between the big carriers, going the extra mile to deliver the most attractive bundles to their customers.
These operators have also innovated to help reduce their cost basis. Perhaps the most significant change has been the change in their retail distribution models. For example, Verizon and AT&T have both invested a lot of money to ensure they have a presence in major towns and cities across the States, with large, plush retail stores to keep brand value high and deliver the best possible customer experience.
Over time, this has shifted towards an indirect retail model, and has led to the formation of ‘authorized retailers’ operating on behalf of US operators. In fact, the number of operator outlets has almost doubled in the US as a result. And the important commonality, is that they all deploy trade-in and buyback programs.
US operators have reacted swiftly to changing market dynamics. They have been quick to seize new and lucrative opportunities when they have presented themselves. What is also telling, is that major OEMs such as Apple, Samsung and Google have also initiated their own buyback programs. Now, these programs are set to become the global norm, and many European operators are, unfortunately, falling behind.
Sustainability in the secondary device market
At HYLA Mobile, we exist to provide industry-leading technology, analytics and logistics solutions to help the mobile ecosystem maximize their sustainability efforts in a manner that builds exceptional value for customers and shareholders, while benefiting the environment.
Our own research has illustrated the growing momentum for the global secondary device ecosystem. Mobile device trade-in programs put $415 million back in the pockets of US consumers in Q2 2018, an increase of $30 million from the same quarter in 2017. Consumers may be keeping their devices longer, on average owning a device for 2.80 years before trading it in, due to a perceived lack of innovation in new devices and rising prices. So, the opportunity to offset the cost by trading in a device is an attractive proposition for both European customers and their operators.
The bottom line is that the secondary device market today represents the fastest growing revenue stream for US mobile operators. Given the same competitive climate facing European operators, they simply can’t afford to ignore it. They must take steps to scale it up to the levels that US operators have, before it’s too late.