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Gartner Sees Rising Tide Of Used Phones

Stamford, Conn. – The number of used cellphones sold privately by their owners is growing rapidly in mature markets because of demand from consumers who want used high-end devices that would have been unaffordable at the original selling price, Gartner found.

So carriers, retailers, vendors and refurbishers must step up their marketing efforts to capture more of the used-phone business to replace lost sales of new phones, the research and advisory company concludes. Their efforts should focus on tech enthusiasts who are buying new phones, the company added.

A survey of U.S. and German consumers found that 60 percent of consumers replace their smartphones because they want additional functionality or just want a new device. In those countries, 64 percent of smartphones that people replace are being reused, with 23 percent being handed down to other users and 41 percent being traded in or sold privately. Seven percent of replaced phones end up in recycling programs.

“Continued demand for high-end used devices will increasingly impact primary-unit sales” and motivate carriers and others to look into the second-hand market, said principal research analyst Meike Escherich. Although privately sold or refurbished phones won’t have too much impact on new-phone sales in the next five years because their market share is still too small, they will put pressure on the pricing of new devices, Escherich told TWICE.

“The growing number of privately sold phones will stir up competition in the take-back market and drive communications services providers (CSPs) and refurbishers to engage in more aggressive marketing campaigns and new incentives,” she added.

If offering a trade-in program, carriers, vendors and retailers “need to have a strategy for turning used devices into a positive asset,” she said.

Trade-in programs should target early-adopter tech enthusiasts, who account for about 25 percent of U.S. smartphone users, Gartner found. Fifty-three percent of the tech-enthusiast respondents said they would replace their smartphones in the next 12 months, with almost half of them saying their replacement purchase would be driven by new features or functions available only in new devices, Gartner said.

“For hardware vendors, this group of self-proclaimed tech enthusiasts is of particular interest because trade-ins provide their channel partners with hardware that can be reused for warranty replacements, and for extending the brand reach into user segments that can’t afford these particular devices at the original purchase price,” said Escherich. “Perhaps most importantly, however, is that tech enthusiasts tend to show high brand loyalty, indicating a good probability for future purchases of the same brand — with the extra credit earned via trade-ins often used for upgrades on their new purchases.”