Deriving Profits from the Refurbished Devices Market
Refurbished devices—once just an afterthought—are poised to play a vital role in the profitability of wireless programs.
Deloitte has reported that the market for used smartphones will expand four to five times faster than the overall smartphone market, with IDC estimating the category will grow to 222.6 million units with a market value of $30 billion by 2020.
This growth is happening globally and being driven by consumer demand, new product launches and an increase in trade-in/upgrade programs across channels. New entrants in the wireless and device trade-in markets, including cable companies and retailers, also are spurring demand for used devices.
However, entering the market is no easy task. It’s a highly competitive business to get into – add the complexities of managing the supply of refurbished devices, and the challenges increase exponentially.
That said, the rewards are very attractive as so-called “secondary devices” can play an important role in helping wireless providers – including cable companies and new market entrants – drive growth and profitability, as well as increased customer loyalty.
Ensure “Device Velocity”
A key element to a successful and profitable refurbished program is having strong “device velocity.” In other words, fast turnaround from the time a device is received to the time it’s resold.
As brand new devices are released each year – with some OEMs releasing multiple devices annually – trade-ins decrease in value, so the longer a trade-in remains in inventory, the more potential profit is lost.
To ensure quick turnaround, refurbished providers must focus on three things:
- Improving and investing in their supply chain, advanced logistics and data analytics capabilities.
- Having the ability to quickly assess and assign price valuation to each device (Caution: this can be a complicated process due to numerous contributing factors including models, carriers and competition, to name a few).
- Maintaining control over the entire lifecycle of a device - everything from supply chain management and price valuation capabilities, to repair and refurbishment, warehousing and disposition at the highest profit possible. Having unified control enables customization and quick adaptation to dynamic changes in market conditions and consumer behavior.
To compete with established carriers, new players such as cable companies and retailers must also provide a comprehensive array of value-added offerings to help enhance the customer experience. Key among them include early upgrades and attractive financing options, as well as premium tech support and on-device diagnostics.
Assurant conducted a study to review the impact of the customer experience in mobile protection on the Net Promotor Score (NPS) of major wireless carriers. One of the key findings across all carriers was that NPS was highest for those who had the option for early upgrades as part of their device financing.
There’s no question that the overall need to deliver a superior customer experience has risen dramatically. Wireless customers surveyed by Assurant said their expectations for a premium experience are growing ever higher. They particularly want an easier trade-in and upgrade process for their devices.
A lesser but still important action is to provide customers with more information about their products. This especially applies to refurbished devices given common misperceptions.
The term ‘refurbished’ often has a negative connotation among customers including the budget conscious. Refurbished devices are frequently considered “damaged” or “slow,” and overcoming that perception is not easy.
While technically they are used, properly refurbished devices are nearly impossible to tell apart from new ones. Consequently, educating potential customers on the thorough inspection and repair process of a quality refurbished device is key to driving interest and ultimately sales.
For example, the bulk of today’s refurbished phones come from trade-in programs where the devices are in perfectly good working order. Experienced device companies will then run these devices through extensive tests to ensure all internal and external functions operate as new.
After addressing customers’ quality misconceptions, the next step is to educate them on the benefits of choosing to buy refurbished rather than new. Two areas to consider highlighting include:
- Cost – Budget-conscious consumers will certainly be swayed by the cost savings of purchasing refurbished, yet don’t forget to include other types of buyers. For example, parents purchasing smartphones for their children, or children buying devices for their older parents.
- Environmental Impact – Helping consumers understand the broader impact of the refurbished market can play an important role in influencing purchasing decisions. Providers should communicate how refurbished devices are a form of recycling that reduces the millions of mobile phones that end up in landfills, and that buying one is a sustainable choice that helps protect the environment.
As more players enter the wireless market, they will need to differentiate themselves in what has become a very competitive category. Robust and comprehensive refurbished offerings can help accomplish this, and also help reduce attrition and increase brand loyalty.
The key is to understand and prepare for the complexity that comes with this business. That said, if executed correctly, providing quality refurbished devices can play a major role in enhancing a company’s reputation and positively impacting the bottom line.