Used Smartphone Market Set to Explode

iphone5tableside91312_610x426_1


In the next five years, the used smartphone market is set to explode. The most popular used smartphone currently is Apple’s iPhone. It’s commanding better pricing than Samsung Galaxy handsets and other phones powered by the Android operating system.

According to Toni Sacconaghi of Sanford C. Bernstein:

Our analysis suggests that the used smartphone market is poised to explode – we estimate that the market will grow from 53 million to 257 million units over the next 5 years. By 2018, we estimate that used phones will cannibalize 8 percent of total new smartphone sales, up from 3 percent in 2012.”

The majority of used phones are collected in the U.S. and resold in emerging markets, especially China, Sacconaghi said.

Two things that are driving the growth in the market for used phones is an increased awareness among consumers about trade-in programs offered by carriers and cell-phone resellers, including Amazon and Gazelle, and also increased resales on consumer marketplaces like eBay.

Sacconaghi stated that iPhones are the most in demand in the resale market, “commanding premium pricing at trade-in and point of sale.” That’s due in part to the large demand among customers who can’t afford a new Apple phone. In other words, iPhone users upgrade more frequently than other smartphone owners as they know they can offset the upgrade cost through trade ins.

According to the NPD Group this week, half of the U.S. smartphone users it surveyed said they would take advantage of trade-in programs the next time they upgraded. That’s a move that has the potential to shift loyalties away from carriers and retailers. Reportedly, in the near future, Apple is planning on offering its own trade-in program through its stores.

Apple’s phones held their value better, Sacconaghi said, when you compare trade-in values for comparable Apple and Samsung models — the iPhone 5 versus Galaxy S4 and iPhone 4S versus Galaxy S3 — after examining resale data at Verizon, T-Mobile, Gazelle, Amazon, and Best Buy in the U.S. Sacconaghi also collected price data in China, India and Brazil.

Used Apple iPhones are so popular that even broken iPhones were worth something at trade-in, while other broken smartphones had no value. Sacconaghi put it this way:

As a rule of thumb, a used smartphone sells at street prices at about one-third of its initial price in domestic markets, while a one-year-old phone may sell for one half to two thirds. International prices are typically richer.”

If a used smartphone is locked to a competitor’s wireless network, it’s not surprising that carriers offering trade-in programs are willing to pay more for them.

For instance, according to Sacconaghi, an iPhone 4 with 16 gigabytes of memory in good working condition traded-in at Verizon was valued at $65 if it is tied to Verizon, but nearly twice as much, $117, if the same phone is locked to AT&T.

The trade-in programs could influence customers to replace their phones faster, which would turn it into a boon for carriers and smartphone makers.

Sacconaghi said that:

The potential saving grace for the smartphone industry is that the value of trade-ins is having an impact on carrier smartphone plans and pricing, which may in-turn accelerate smartphone replacement cycles – a potential positive for smartphone [makers], including Apple.

“The high residual value of smartphones is an important factor behind the introduction of T-Mobile’s Jump plan, AT&T’s Next plan and Verizon’s Edge that allow customers to trade-in phones for upgrades after 6 or 12 months since as part of the trade-in consumers have to turn in their old phone. After AT&T and Verizon pushed out upgrade times on traditional subsidy plans from 18 to 20 to 24 months, these plans have the potential of moving average replacement time back down – a potential positive for all smartphone vendors.”

In both the U.S. and China markets, according to Gene Munster of Piper Jaffray in a separate report today, said a four-month review of selling prices for used iPhones and Galaxy phones show Apple’s devices retained more of their value than Samsung’s.

Munster’s research involved comparing pricing data for the iPhone 5, 4S and 4, and Galaxy S III, Note II and S IV on eBay in the U.S. and Taoboa in China since March 15. To determine a “a fair value” for each device, he relied on sales data for the last 50 phones sold each week.

According to Munster:

The iPhone 5 has maintained its value better in China than the Galaxy S IV which shows continuing support for Apple’s flagship device within China. We believe this is important as Android dominates China (with more than 75 percent market share) and thus Apple appears to be maintaining mindshare in the high-end market.”

With the used Smartphone market set to explode, perhaps this is the best time for you to either purchase a used Apple iPhone, or to sell one which you currently own.

Written by: Douglas Cobb

Source 1

Leave a Reply

Your email address will not be published.