The smartphone market was rarely out of the spotlight in 2017. It was a busy year for flagship device launches, relentless marketing efforts, and a certain 10-year anniversary.
Although there have been some challenges, it wasn’t all bad news. Figures from IDC indicated that Q3 sales of smartphones were up 2.7% from Q3 in 2016. Canalys has estimated that Apple shipped 29M iPhone X units in Q4. And, the pre-owned device market has showed that it is well on its way to becoming a $39 billion market by 2025.
But with more players continuing to enter an already highly competitive and saturated market - and changing consumer behavior - carriers, OEMs, and retailers will have their work cut out over the next 12 months. We take a look at how both the new and re-purposed device markets are set to fare in 2018.
Driving awareness of trade-in programs
Consumers are holding on to their devices for longer than ever before – nearly three years at a time - which means that encouraging consumers to part with their devices and upgrade is increasingly difficult. Simultaneously, HYLA Mobile’s own research estimates that 96 million devices annually are either left in their drawers or handed down to other consumers without a thought of the retained value they could hold. In response, we have started to see carriers, retailers, and OEMs all driving awareness of trade-in programs. But they will need to take a more proactive approach to educate consumers of the benefits of trading in their used devices. See figure below for value depreciation of sample devices that consumers need to take into consideration during upgrade cycles:
Trade-in programs offer a win-win solution for all. Consumers get money in their pocket – close to 50% of which gets spent on high margin accessories or a higher value device; carriers recoup the latent value in the used device by either monetizing it or repurposing it for other uses; other consumers get access to a higher-grade device at a fraction of its cost; and last but not least, there are positive environmental effects in keeping devices out of landfills. Carriers, retailers, and OEMs that have successfully deployed and promoted a device trade-in program, have experienced higher customer retention, higher Net Promoter Score, increased foot traffic in stores, and increased revenue from higher margin products. As the benefits for all stakeholders are realized, we will start to see a greater push towards trade-in programs.
The battle to retain market share
2017 saw the launch of the eagerly awaited Pixel 2 device, where Google confidently reaffirmed its position in the smartphone market. They also offered their own trade-in program which is built into its web store’s buy flow. Google’s program has gained popularity because it enables customers to use their old device - Pixel or not - as currency towards the purchase of a new Google device.
Consumers can subsidize the cost and gain access to a device that they perhaps would not have been able to afford otherwise. By putting trade-in front and center during the buying process, it educates consumers on the value of their used devices, which is key to boosting both the new and used device markets. 2018, in addition to carriers, will see the other OEMs and retailers recognizing the opportunities that trade-in programs present.
New feature introductions
After the launch of the iPhone 8, many consumers were left feeling a little deflated with the perceived lack of innovation. This has been pinpointed as one of the reasons behind the low sales figures and subsequently the absence of upgrades. The introduction of the iPhone X turned this sentiment around with new features such as the bezel-less display and facial recognition pushing the iPhone X into the lead as the best-selling smartphone worldwide in Q4.
Other devices launched last year also appeared to offer ‘new’ features, including the Samsung Galaxy 8 with its voice interaction, or the Google Pixel 2 with its unlimited cloud storage. With new devices expected to launch from BlackBerry, Sony, and Huawei in 2018, we could see a renewed fight for leadership in the market – or simply an extra slice of the device revenue pie.
The birth of the wearable trade-in
The launch of Apple’s latest iWatch – now with added cellular - is already spurring the trade-in of wearable devices. AT&T and Verizon both offered trade-in deals for the iWatch generation 1 since the launch. Using the smartphone market as a basis, the used wearable market also has the potential to be huge in 2018.
So will consumers finally part with their devices?
Consumers might be holding on to their devices for longer, but we know from our own research that more upgrades and trade-ins are happening more than ever before. As both the retail world and consumers start to recognize the value of trade-in programs, we can expect to see a boost to the smartphone market in 2018. But with the perceived absence of innovation among leaders in the smartphone market, we’ll have to wait and see if any of the new players take a larger slice of the market.