Mobile phones used to have a limited shelf life. After a couple of years, consumers would upgrade to the latest model and the old phone would end up in a drawer with spare change and mismatched keys. But several factors led to a booming secondary market for pre-owned phones.
In Europe, encouraging phone buybacks and trade-ins was seen as a way to drive new sales. US carriers and retailers soon followed suit, testing consumer adoption and the operational process required to accept and resell devices.
Through a partnership between Best Buy and Brightstar, our teams were at the forefront of developing and formalizing a retail solution in the US.
1Brightstar will manage the receipt, sorting, triage, repair, refurbishing, and repackaging of mobile phones that come back to Best Buy through its various service programs, including Trade-In and Buy Back, as well as via general returns and exchanges.
Best Buy will also leverage Brightstar’s domestic and global distribution channels to improve device resale values in secondary markets, thus offering customers attractive trade-in opportunities to upgrade to the newer product models and technologies.
Fast forward to today, a global ecosystem now operates what will grow to a $67B industry by 2023, according to IDC2. So, what factors occurred to create the mobile circular economy?
Conventional Wisdom: Cost of product determines value
New Wisdom: The value of the item is what the consumer will pay
Conventional wisdom says it’s cheaper to throw away low-cost products rather than try to resell. And this is sometimes the case. For an item that costs the retailer $3, it makes no sense to pay an incremental $4 to transport and process it for resale. Throwing it away is the logical choice.
But the relative cost of an item does not determine its value in a resale market. The true indicator is margin. In the previous scenario if the item in question costs $30, but it generates $20 when refurbished, the returned item can be a profit to the retailer rather than a burden. There is still life (and margin) in the item.
The resale channel does not need to be the same as the initial sale. Nordstrom Rack recently told the National Retail Federation (NRF) that 83% of Nordstrom’s online returns are resold in Nordstrom Rack stores3. Creating a new channel appeals to a new customer segment, providing incremental growth, not cannibalization.
Additionally, in a world placing more and more importance on sustainability, reselling returned items does more than make a profit. Resold items avoid landfills, reducing carbon footprint. They also attract GenZ and Millennial customers, who value a resold item for the reduced cost, but just as important for their role in protecting the environment with their purchase.
Conventional Wisdom: Bulky products are too expensive to resell
New Wisdom: Technology can enable selling without movement
Many companies believe that there is not a functional model for reselling large items like sofas, refrigerators, mattresses, and treadmills, due to the high cost of transportation. Frequently these items end up in landfills, recycled or customers are told to just keep the item with a refund, a costly proposition. In fact according to the EPA, in 2017 alone US furniture waste totaled 12.2 million tons of which over 80% went to landfills.4
The process of moving large products from one customer to another typically requires many steps. Product may be picked up from the consumer making a return and then shipped to a centralized warehouse. This product can be moved again to a retail outlet for resale and then again to a new customer’s home.
Large products require a new paradigm to create a profitable resale market. Creative use of technology can be leveraged to replace the high cost of transport, resulting in regional marketplaces for large-scale products. Augmented reality can show products in consumer’s homes before they buy, allowing them to see how the product’s “flaws” would look in their space. If a scratch or fabric flaw is negligible or even not visible, customers will jump at the chance to purchase like-new, large-scale purchases at a reduced price.
A company innovating in the space is Aptdeco5 who uses technology to help connect sellers to buyers. Their platform, available in NY, Philadelphia, and San Francisco, enables the sale and provides the transportation service to get from consumer A to consumer B while staying in the local market.
With transportation and processing costs drastically diminished, the weight of your bulky-item returns will shift from the red to the black. Again, leverage sustainability to ease your footprint and attract environmentally conscious customers to your brand.
Conventional Wisdom: Sanctioned markets for used high-end goods diminish your brand
New Wisdom: Pre-owned premium products will increase your reach while strengthening your brand
In the past, premium brands have been reluctant to allow their products to be resold at market. The thinking being that product selling at a cheaper price dilutes the brand and cannibalizes the sale of new goods. While this approach has worked in the past, an evolving market requires an evolved strategy.
The paradigm shift needed here is in scope. By selling high-quality, refurbished goods within an official channel your brand is exposed to an entirely new segment of consumers. The brand remains aspirational through new products but becomes approachable via a pre-owned, sanctioned market. Additionally, this new market will incent your current customer base to buy new each year, given the opportunity to sell older products and use the proceeds to buy the latest offering.
What’s more, it allows you to embrace sustainability, further strengthening your brand in the overall marketplace. When a product is of the highest quality, it has multiple lives.
A current example is in the world of designer handbags. A high-end bag retails for over $1,000 or more, well out of reach of most consumers. However, if you manage a marketplace where current customers can give a second life to their bags via resale, you give your current customers capital to purchase new, gain new customers at a lower economic scale, and become a symbol of sustainability in the process.
Conventional Wisdom: Certain product segments cannot be refurbished to “like new” C condition
New Wisdom: Refurb processes developed by trusted brands are creating trust in used, personal products
Many believe there are product segments customers will not purchase used due to the “ick” factor. Items such as small appliances, headphones, or apparel may be concluded as disposable. However, techniques are being developed that enable sanitation at scale, and customers have become confident in quality standards.
Amazon Renewed6 has an extensive assortment of used small appliances from blenders to juicers to expresso machines, all inspected, tested, and backed by an Amazon Renewed Guarantee. Best Buy7 has refurbished Apple and Samsung in-ear headphones. An entire business model has been created for AirPods by Pod Swap, with customers trading in AirPods with diminished battery life in exchange for refurbished replacements. They market the sanitization process as ultrasonic micro-removal suction of dirt and organic debris, medical-grade solution treatment, and industrial-grade low-temperature sterilization(8). Clearly, there is a growing trust that refurbishment processes are effective with even the most personal of products.
Secondary markets are a necessary commercial evolution. While there are barriers to entry, breaking through those barriers lessens the burden of increased returns, broadens brand exposure to new consumer groups, and adds sustainability as a tenet of your brand in a time when it has never been more important.
We have only scratched the surface of secondary markets. Brands can develop their market to achieve financial goals. The earliest adopters in every product category not only maximize profits but also tilt this new, evolving market in their favor. If you aren’t taking advantage of this latest evolution you’re receding, not competing.
1. Best Buy Taps Brightstar to Streamline Reverse Supply Chain for Mobile Devices, October 8, 2012
2. Worldwide Market for Used Smartphones Forecast to Grow to 332.9 Million Units with a Market Value of $67 Billion in 2023, According to IDC, January 13, 2020
3. Nordstrom Rack Redefines ‘Convenience’, June 25, 2021
NRF | Nordstrom Rack redefines ‘convenience’
4. Furniture Waste – the Forgotten Waste Stream, November 10, 2020
Furniture waste – The forgotten waste stream - Recycle Track Systems (rts.com)
5. Company Website: www.Aptdeco.com
6. Company Website: Amazon Renewed
7. Company Website: Bestbuy.com
Refurbished Headsets - Best Buy
8. Company Website: ThePodswap.com
Cleaning Process – Podswap (thepodswap.com)