Recommerce, or “reverse commerce,” refers to buying and selling pre-owned products. It involves the buyback or trade-in of devices, repair or refurbishment, and resale.
Recommerce, or "reverse commerce," refers to buying and selling pre-owned products. And consumer electronics has become a particularly profitable recommerce market the past few years.
Typically it involves the buyback or trade-in of devices, repair or refurbishment, and resale.
The sale of used electronics has always existed. What has changed is businesses willing to invest in repair and refurbishment so that this sale is more organized, more trusted, and more sustainable.
For instance, you can now buy a refurbished device with almost as long a warranty as a new device.
Plus, there is greater support for recommerce from governments — tax breaks and funding — that are willing to invest in improving sustainability.
Even device manufacturers like Apple and Samsung are investing in recommerce following recent supply chain disruptions and reduced availability of rare earth metals.
The Recommerce Supply Chain
The recommerce supply chain is a bit more complicated compared with a regular retail supply chain. There is no way to manufacture the stock you need. And there is no “right” way to buy inventory.
Many electronics retailers, both big and small, offer trade-in programs for old devices. Customers can trade in their old devices for a discount on a new one. Retailers either refurbish and resell the device themselves, or sell to someone else who specializes in this
The trade-in program also benefits the environment. Instead of old devices ending up in landfills or unused in people’s homes, they are reused or recycled.
A buyback program is when companies purchase old devices from customers, mostly for cash.
In both cases, the value of the device is based on its “grade”. The most profitable buyback is from a customer who’s looking to upgrade from a slightly older device despite it being in perfect working condition. These devices often require nothing more than cosmetic refurbishment to be sold onward.
OEMs, or device manufacturers, often have their own buyback and trade-in programs.
Traders & Vendors
A mid-market refurb business — one that requires a constant supply of inventory — is most likely to use a wholesale vendor who sells batches of devices of various grades. A grade is a way to have a common understanding of the current state of the device.
These devices could originate from retail buyback and trade-in programs, businesses that are liquidating, IT leasing companies, or retail rejects/returns.
This stock is then repaired or refurbed to be sold. Typically, the refurbisher starts by inspecting each device to confirm that the actual grade matches the grade that was provided by the seller while obtaining the inventory.
A diagnostics tool like PhoneCheck or Blancco is often used to check for hardware or software issues and perform data erasure to ensure data privacy
Some refurb businesses do component level repair (micro soldering), but most simply replace defective parts. However, refurb businesses typically profit most from inventory that’s in good enough shape to just be cleaned and sanitized before listing for sale without having to do repairs.
The actual sale of a refurbished device is not much different than other retail sales of consumer electronics. While consumers are usually less trusting of used products, perceptions are changing.
Significant efforts have been made to educate buyers and to provide transparency on what refurbished devices are, and why they’re a sensible option from both the price and the sustainability perspective.
iPhones, for instance, retain the highest resale value and demand for used iPhones is always high.
Pricing the device: This is one process that is considerably different from reseller business. There’s no direct manufacturing cost and no device manufacturer that sets a base value in the market and for resellers.
There is the cost to acquire it, but that value does not represent the true value of the device. No used device is exactly the same as another. The grading system is the alternative, but there are differences even within the same grade.
Plus, vendors and suppliers often get it wrong when assigning grades.
Pricing decisions are also based on the market, meaning “it’s worth as much as someone is willing to pay.”
To top it all, refurbished devices are competing against new devices, both online and offline.
This is why data is so important in the refurbishment business. There are a number of factors that enable the business to earn sustainable profits.
Offer a warranty: Providing a warranty or having a fair return policy gives customers greater confidence when purchasing a used device.
Use an online sales channel: Most electronic devices are sold online. A combination of digital marketing, warranty, and an ecommerce channel offers the most profitable mix when selling refurbished devices.
Who is Purchasing Recommerce Products?
Recommerce is still evolving. Even so, there are demographic trends that indicate consistent profit and an increasingly growing market.
An eBay report found that 80% of “Gen Z” respondents and 78% of “millennials” had purchased pre-owned goods in the previous year. The numbers are not much lower for the rest: Gen X at 75%, Baby Boomers at 70%, and Post-War at 62%.
The younger generation is also leading the way in the sale of unused products. At 32%, Gen Z led the way with the largest percentage of sellers who started in the previous year.
Clearly, those with the most amount of disposable income are more conscious about sustainability and cost.
This reflects market numbers as well. Between 2016-2020, used smartphone sales grew by 26% in North America and 20% in Europe.
Why it’s a Business Opportunity for Repair Centers
There are technicians who can refurbish devices, service managers who can create processes, and business owners have an understanding of sales channels and marketing.
The refurb business is only a couple of steps away for a mid-market repair business. Refurbishment is often more profitable than standard repair services, because all devices do not need to be repaired to be resold.
Additionally, even if repairs need to be done, minor repairs can have a big impact on the price. So average refurb processes are less complicated and labor intensive while the margin is higher.
Are you interested in the sale of refurbished devices? Fixably Refurb is designed to provide you a data-driven tool to maximize profits. Book a demo to know more.