As the sale of used devices grows rapidly, businesses have to navigate a mix of old and new challenges — including sourcing, industry standardization, and lack of software support.
The recommerce sector, especially the used devices market, has grown significantly over the past decade.
In 2022, used smartphone shipments of 283 million was an 11.5% increase over the 253.4 million units shipped in 2021. And it’s expected to grow by 10.3% (CAGR) from 2021 to 2026.
Plus, shipments of used smartphones are growing faster than new smartphones.
It’s good news and bad news. It is clearly the right time to be in the refurbishment business. But fast growth brings new competitors and greater expectations from customers. And it quickly becomes difficult to stay competitive and be profitable.
Here are a few challenges in the buyback, trade-in, and sale of used or refurbished devices.
OEM Pressure (Apple, Samsung)
Apple sent 10.4 million devices to be refurbished in 2020 according to the company's environmental report. The number has only grown since then.
OEMs like Apple and Samsung are active with their buyback programs, with the logistics troubles during COVID-19 spurring larger manufacturers into wanting more control over raw materials and parts inventory.
This puts pressure on availability of used devices for refurb businesses.
The situation is similar to the entry of manufacturers to the repair industry. The likes of Apple and Samsung have over the past decade taken more interest in first-party repair.
Lack of Awareness Among Consumers
Refurbished or used devices have gained greater popularity, but it’s still difficult to compete with new devices and falling prices of mid-tier personal devices. Most major manufacturers now have a mid-range offering that is affordable for all consumers.
This despite used devices offering incredible value for customers. Here’s a comparison we made in our blog on why refurbished devices make sense for consumers.
The problem lies in consumer trust. Unlike a brand new device, used devices historically did not have warranty.
But businesses are now willing to invest in repair and refurbishment so that this sale is more organized, more trusted, and more sustainable. It’s the responsibility of the industry to ensure this investment leads to greater consumer trust.
Sourcing
You can’t sell what you don’t have. Sourcing has consistently been a difficult challenge for refurbishment. You cannot rely on in-house buyback and trade-in programs if you intend to sell at scale.
You need to find wholesale suppliers who can guarantee delivery of the inventory you need without having to accept low grade devices.
There are a few recurring challenges in sourcing.
Great trial order, but quality dips rapidly
Suppliers could offer a small trial batch that meets your requirements. But this could be a bait to get you on a long-term contract. You’ve got to be on top of your reporting to realize if there’s a drop in standards.
Are you seeing more returns from a specific supplier? Are more devices failing diagnostics tests? Does the mismatch in grading fluctuate wildly — some good batches and some really bad ones?
Random quality assessments work well, but having accurate reports per supplier and per batch gives you great leverage every time you have a discussion.
Difficult to Meet Quantities
This was incredibly common during the market lockdown days and the resultant logistics nightmare. But it’s not uncommon in the used devices market in a regular year.
Suppliers are willing to give favorable offers but then struggle with the purchase orders.
Diversify your pool and find a variety of wholesalers. This includes businesses that are wholesale traders of used devices, but also companies that work with liquidation and return stock from companies like Amazon, OEMs like Apple, or retailers like BestBuy.
Plus, check where they get their stock. You can diversify on where in the world your stock comes from.
Variable Pricing
The bait and switch applies here as well. You forecast revenues, profits, and business expansion based on cost.
In a volatile market like for used devices, your suppliers can quickly add layers of margins and add to cost.
Having a diversified pool of suppliers helps in this regard, so that you’re not reliant on one. Try to find companies that work directly with OEMs and major retailers.
Keep a track of cost, earnings, and returns for each partner and each batch. You’ll be more equipped to renegotiate hidden costs.
Lack of standardization
Lack of standardization is probably the most obvious challenge in the industry. This makes it difficult for refurbishers and consumers to know what they are getting when they purchase refurbished electronics.
Standardization has two major aspects, grading and data compliance.
Data compliance is the easier of the two to solve. Refurb businesses have to legally ensure that devices are cleaned of any personal data. There are specialty software like Blancco and PhoneCheck that do this and you can complete this process. But having tainted suppliers might impact you as well.
A breach of GDPR (General Data Protection Regulation) in the EU, for instance, can result in a fine of either 4% of your turnover or €20 million. This doesn’t cover the impact it could have on your brand and how customers perceive your business.
In contrast, grading is an industry issue. There isn’t one definition for the most commonly used grades in the used devices industry. Grades usually range from A, the best, to D. Others might have more levels of grading, or less.
You could rely on an organization like CTIA to set standards that you use. This could mean using it internally or insisting that suppliers use it as well.
Closely related is the use of counterfeit parts. It’s counterfeit only if your supplier claims it’s a manufacturer-original when it’s not. Otherwise, use of quality third-party suppliers makes it easier to repair or refurbish a device.
Lack of Software Support
Refurb businesses, and the recommerce sector in general, suffer from the lack of tailored software.
Our experience has shown that refurb or recommerce businesses have a few common software challenges:
- Lack of reporting on margins, turnaround times — making it difficult to track profitability in real time
- Identifying devices that fall through the cracks in the process, resulting in loss of margin
- Measuring technician performance and bottlenecks in the workflow
This is a problem we’re solving at Fixably. Fixably Refurb is a plug-and-play software solution that will enable refurb businesses to streamline performance, improve process efficiency, and get visibility of the sales pipeline.
Book a demo to learn more.
