Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now


Cellphone Trade-Ins Driving New Retail Opportunities

The worldwide market for refurbished cellphones sold to end users will grow to 120 million units by 2017 with wholesale revenue of about $14 billion, up from 56 million units with a $7 billion wholesale value in 2014, Gartner forecasts.

And the trend is opening up new revenue opportunities for retailers and carriers that want to jump on the mobile trade-in bandwagon, said Diana Stuparu, marketing director at NextWorth Solutions, which provides in-store and online CE trade-in platforms for major retailers. “Because exchanging devices has become so mainstream, retailers have the opportunity to profit.”

Besides creating a secondary revenue stream, she explained, “trade-in locations at stores bring in customers who might not have stopped in otherwise.”

To take advantage of the potential, Gartner analyst Meike Escherich recommends handset makers incentivize their channel partners “to push for same-brand trade-ins … to increase customer retention for your own brand.” The tactic can also shorten upgrade cycles, Escherich said.

For their part, retailers can segment their customer base “to create targeted offers for those buyers that are most likely willing to take advantage of trade-in programs,” she said.

Offering refurbished phones will also help retailers tap growing demand by consumers who “are attracted to high-end devices that they would not have been able to purchase at the original selling price,” she said. That’s particularly relevant now that carriers no longer subsidize cellphone purchases, said Stuparu.

“Certified pre-owned and refurbished devices provide a viable option for those who would like to have up-to-date technology with a moderate price point that matches their budget,” Stuparu said. “Customers can save further by bringing their pre-owned devices to the network of their choice and choosing a plan that rewards them for it with a monthly subscription savings of about $15 or more a month.”

Growing demand for used phones in foreign countries is also creating opportunities for retailers that want to offer trade-in programs. Second-hand devices are “a hot commodity in foreign markets,” Stuparu said. China is a “huge market” for iPhone 5S and 6, while iPhone 4 is particularly popular in Africa, she explained.

Growing trade-in options: To tap into demand, many carriers and retailers, including Best Buy and Walmart, now offer online and store credit in exchange for used personal electronics, Escherich said. And “so many websites will pay cash to people who mail in used devices – such as BuyBackWorld, Gazelle and NextWorth – that, in the U.S., aggregators such as uSell have appeared, listing bids from multiple resellers.”

These companies are tapping into growing demand. In the U.S. and Germany combined, 41 percent of surveyed consumers said they would sell or trade in their existing phone when they get a new one, Gartner said. In the U.S. alone, the figure jumps slightly to 43 percent (29 percent who plan to trade it in combined with 15 percent who plan to sell it privately).

Other people will dispose of their old phones in other ways, with 23 percent in the U.S and Germany combined planning to give it away, 15 percent keeping it in a drawer, 7 percent bringing it to a recycling program, and 1 percent simply throwing it in the garbage, Gartner found.

Recycling: Bringing a phone to a recycling program isn’t always the most profitable solution for owners of very old or broken phones, Escherich noted, now that several trade-in and commercial take-back programs accept nonworking phones. Broken phones are typically sold to wholesalers that recondition the phones and sell them back to carriers or retailers for use as warranty replacements, she said.

Recycling can be profitable for companies in the business. “Handled in large volumes, used phones can be a veritable treasure trove for those in the business,” she said. Each mobile phone contains 0.034 grams of gold, 16 grams of copper, 0.35 grams of silver, and 0.00034 grams of platinum.

Stuparu also sees damaged devices becoming widely accepted as trade-ins. “As repair technology becomes more advanced, companies are able to absorb the cost of repairs and refurbish devices for resale,” she said. “It’s also advantageous for companies to accept damaged devices; once customers realize how much a repair may cost, they may be more apt to trade-in the damaged device for a credit toward a newer model.”

One potential threat to the refurbishing market is the growing number of private sales of used phones, but that will likely “stir up competition in the take-back market and drive [carriers] and refurbishers to engage in more aggressive marketing campaigns and new incentives,” said Escherich.

Infographic source: