July 2016 | Commentary | Reverse Logistics

Dialing In to the Secondhand Smartphone Market

Tags: Reverse Logistics, Logistics, Supply Chain

Isaac Mathew is High Tech Marketing Senior Manager, UPS, 404-828-8126

More than any other mobile device, our gadget-centric society loves smartphones. The next big thing is always right around the corner. And that's the phone we want.

This compelling trend has spawned a budding market for secondhand smartphones. Many consumers are content to chase the next product generation one or two years behind if it saves them money.

Today, only a fraction of phones are resold. However, IBISWorld expects the secondhand smartphone market to see double-digit percentage growth over the next few years, creating an obvious business opportunity. The key to seizing it is a nimble and efficient supply chain.

Nearly two-thirds of Americans own a smartphone today, compared to 54 percent in 2014, says Pew Research. As that figure increases, the number of phones for potential reuse will also rise. And nearly two-thirds of consumers replace their smartphone every 18 to 24 months; only 41 percent trade or sell their used device, finds a 2014 Gartner survey.

The aftermarket future appears bright if new phone production is any indication. For instance, Apple's iPhone 7 launch will drive demand among loyal customers who will likely abandon their "old" phones for the new model. That's sure to boost secondary sales.

While tempting, the secondhand smartphone market is also complex, fragmented, and fluid, ripe for consolidation and vulnerable to other shocks.

For one, some wireless carriers are shifting to a phone leasing or purchase program, which may cause customers to seek cheaper alternatives or extend the lifespan of existing phones. Meanwhile, discount manufacturers continue to grow in emerging markets and may try to penetrate developed economies.

Retailers and original equipment manufacturers are also muscling in with buybacks, resales, and recycling programs as part of customer loyalty and sustainability strategies. They need to decide how more secondary sales impact revenues for new phones and parts.

There are a lot of moving parts to this industry, so it's crucial to have a supply chain that can react to changing conditions. Logistics partners can help to:

  • Control costs. The right partner can simplify the supply chain and reduce time-consuming redundancies through package tracking, simplified entry, and label generation.
  • Meet demand. Manufacturers need a fast and flexible supply chain that is always ready to meet demand. It's important to tailor the shipping product mix to a business's supply chain needs and employ world-class tracking technology.
  • Attract customers. Cell phone providers must be ready to meet demand when and where it materializes. A logistics partner should offer a full suite of commercial and residential shipping products, a global transportation footprint, and customs brokerage.
  • Keep customers. This requires solutions such as flexible billing options and simplified returns. Partners also can offer alternative package drop-off and pickup options.
  • Extend value. Cell phone providers with the right refurbished phones inventory can provide customers on-demand replacements. Additionally, as some smartphone sellers move to a lease model, customers will receive automatic upgrades. Logistics providers deliver the new phone to a customer's door and pick up the old phone, increasing the chance that used phones get a second life.

    The right supply chain partners can help companies achieve success in the secondhand phone market by maximizing earnings and navigating the uncertain terrain ahead.

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