What is a Refurbished Mobile?

In simple words, refurbished devices are lightly used, returned and repaired before coming to the market. The refurbished tag ensures that each device is thoroughly checked and the highest-quality refurbished phone is as good as new, with a lower price point. According to a study, the used phone market is growing 4-5 times faster than the overall smartphone market. Globally, this industry accounts for $23 billion and is expected to surpass $52.7 billion by 2022, according to International Data Corporation (IDC).

From the above graph it is evident that the prices of the refurbished smartphones are significantly lower than that of the new phones whereas slightly higher than that of the second-hand phones. Hence, there lies a great opportunity for the refurbished market in India. With Apple continuing to foster its trade-in and insurance programs, and Samsung getting more aggressive with its buy-back programs the two smartphone giants have dominated the secondary smartphone markets in 2019. It is quite evident that flagship models are preferred in both primary and secondary markets. For Samsung, it was the Galaxy S series, and for Apple, their flagship iPhone X that led to the growth of sales in the secondary markets.

Why should we go for a Refurb?

  1. Low Cost – As evident from the graph, a refurbished smartphone generally sells at a 20-50% discount over new smartphones. The quality of repair is a major factor regarding the pricing of a refurb and they function exactly as they did when they were new.
  2. Ecological choice – If all the 140 million mobiles currently discarded off end up being recycled, it’d save enough energy to power over a quarter of a million homes annually.
  3. Warranty & Safety – Often all the refurb come with a 12-month warranty when bought from recognized stores. It is 10-20% expensive than used phones but is better inspected.
  4. Phones have a longer Life Cycle – one of the common misconceptions regarding refurb is that phones have a short life cycle but this is not true. When bad parts are replaced by completely new ones, the phones’ lifespan rises to a whole new level.

Scenario around Globe

According to the study by counterpoint research, the global market for refurbished smartphones declined one percent YoY in 2019. This trend is mainly linked with the downturn of new smartphone sales in key regions like the US, China, Japan, and Europe. The US-China trade war has also affected the secondary markets as many large players are being cautious about their purchase.

Emerging economies like India, Africa, and Latin America have shown a positive growth because the refurb market is at a growing stage. Many users in these countries are looking for affordable devices to come online. Thus, the transition from featured phones to smartphones and aspiration of getting these phones at an affordable price fueled the growth in these economies. With the refurb market shifting towards a more organized sector in emerging economies such as India, there was a net growth in the YoY refurb sales during 2019. Whereas China, the largest market for refurbished devices, saw a 4% YoY decline. The IDC predicts the worldwide market for used smartphones will grow to 332.9 million units with a market value of $67 billion by 2023. However, because of the COVID-19, the growth will be affected this year.

Indian Scenario

India is the second-biggest market for smartphones after China, it is also the fastest-growing market for refurbished smartphones. Around 14 lakhs second-hand smartphones were sold in India in 2019 contributing to 9% growth in the refurbished smartphone sales. Following are the scenario why refurb market can grow in India.

  1. Brand-conscious Indian consumers – India is the fastest-growing refurbished market since Indian consumers are brand-conscious and price-conscious at the same time. They want to flaunt brands like Apple and Samsung but do not want to shell out the price for the same, thus, opt for a second-hand market. Statistics suggest that less than 5% of Indians are willing to spend more than $400 (₹30,000) on their next smartphone, and hence, tend to choose refurbs over new ones.
  1. Only thirty-three percent penetration – Being the second-largest smartphone market in the world India has over 400 million smartphone users and has penetrated only one-third of the total mobile users. Thus, the smartphone market holds great potential in the future.
  1. Smartphones upgrade cycle – The dropping price of the smartphone coupled with discounts offered by online sellers are leading customers to upgrade smartphones. According to IDC, an average Indian user has an upgrade cycle of 12-month, sometimes even lower in urban areas where users have a high disposable income. As per Cashify, around 19% of users upgrade their devices within the first year, while 44% do it within two years. Thus, shortening the lifespan of mobile devices.
  1. Great opportunity for the players in Unorganized Sector – As mentioned earlier these markets are largely dominated by unorganized markets. However few brands are taking up the initiative to make an organized market and create a franchise in this market. This will create a lucrative opportunity for the players in the unorganized market to join such a franchise.

The refurbished market in India is mostly unorganized but is witnessing high growth, wherein only 18% of smartphones make it to the secondary market today. The refurb market in India is set to grow an additional 27% and projected to become a $10 billion industry by FY22. According to Jayant Jha, the CEO of the Yaantra refurbished market will be $45 billion globally and a large part of the market will be led by India.

Contributor: Leveraged Growth
Co- Contributor: Devansh Bihani & Aditya Kakoti

Research Desk | Leveraged Growth