Estimated to be worth $17 billion, the global secondary device market continues to grow. Counterpoint Research reported that worldwide sales of refurbished smartphones were at 140 million units in 2018. Though this was just a 1% growth over 2017, India realized a 14% growth of pre-owned device sales equalling 14 million units.
With India becoming the fastest growing smartphone market in the world, we are starting to see the likes of Chinese manufacturer, Xiaomi, giving Apple and Samsung a run for their money. Xiaomi has its eyes set on the top spot in the Indian pre-owned smartphone space - a segment which the US and Korean heavyweights have historically dominated due to their undefeated aspirational value.
But can Xiaomi take on the heavyweights in the Indian market?
For cost conscious Indian consumers, a pre-owned smartphone with a lot more features is likely to be more attractive than a brand new smartphone with less specifications. Consumers are also aware that the popular smartphone manufacturers like Apple and Samsung build their devices well and therefore have longer usability. As a result, more expensive smartphones like Apple’s iPhones and Samsung’s Galaxy series, which would normally be out of a mid-market customer’s reach, can find a second or third life after being refurbished and sold at a discount to their market retail price. And this is what has given Apple and Samsung an advantage in some emerging markets such as India.
But Xiaomi’s proposition is different. Even at full retail price, the cost of a new Xiaomi device is considerably lower than that of a new Apple or Samsung device. It was widely reported that Xiaomi’s Mi 8 model has many similarities to the iPhone X, with one major difference – the Mi 8 is less than half the price, at around $421. Consumers could purchase a Xiaomi device that has very similar capabilities and features of an iPhone, at a much more affordable price. So, with this in mind, a refurbished Xiaomi device would be even more affordable and more attractive to a cost-conscious consumer in India - and this could mean some serious competition for the US manufacturer.
One area of criticism of Xiaomi has been that their phones are not as durable as the high-end iPhone or Samsung devices. Consumers have complained about defects in their devices after a year of use. Apple and Samsung devices have been successful in secondary market due to their higher quality and durability.
But Apple has its own plans
One factor that has helped Xiaomi keep costs down is avoiding tariffs on imported smartphones. In fact, more than 95% of the devices sold by Xiaomi in India are manufactured there.
Nevertheless, it seems that Apple will not be going down without a fight. In the last year, Apple has been focusing on gaining assembly and manufacturing rights to drive local production and stimulate smartphone take up. Moving its focus away from the secondary device market, the smartphone manufacturer now produces iPhone 6S and 6S Plus in India, as a move to battle these tariffs implemented by the government. These phones remain popular in India because of the lower price point of the devices, so they appeal to consumers looking for more affordable first-hand iPhone models. This year there have been announcements of the iPhone 7 also being manufactured in India along with the expectation of Foxconn beginning manufacturing the iPhone X later this summer.
Can Xiaomi sustain its lead?
It seems that Xiaomi’s presence in India has already made a great impact, with the brand gaining familiarity among consumers. In fact, it has captured the number one spot in smartphone market share for 2018 knocking Samsung out of the dominant position that it previously held. However, Samsung is determined to regain the top spot and earlier this year launched several new phones to take on the competition.
While Samsung and Apple have both relied upon their aspirational value in the past, the Indian market has shown to be price sensitive. And this opens wide the opportunity for new players that are able to meet the demand for a device that looks and feels like an Apple or Samsung model, but comes at a much more affordable price.