The £12 billion market you may never have heard of

Deloitte predicts that in 2016 consumers will sell outright or trade-in approximately 120 million used smartphones generating more than £12 billion for their owners, at an average value of £95 per device. This is a 50% increase from the 80 million smartphones traded in 2015, with a value of £7.5 billion, or an average value of over £90.

The value of sold or traded-in smartphones will likely be about twice that of wearables and 25 times the value of the Virtual Reality (VR) hardware market. And the growth rate of the used smartphone market is forecast to be 4-5 times higher than the overall smartphone market. What’s more, we expect the practice of selling smartphones could well accelerate through 2020 as both consumers and suppliers increasingly embrace the practice of selling or acquiring second-hand smartphones.

The afterlife of smartphones: what happens?

We predict at least 10% of premium smartphones (£350 or higher) purchased new in 2016 will end up having three or more owners before being retired, and will still be used actively in 2020 or beyond.

About half of the devices are expected to be traded in to manufacturers or carriers in exchange for credit toward a new smartphone. The remainder will likely be sold online privately, to retail shops or to second-hand device specialists.

For consumers the primary incentives to sell a device - rather than keeping it as a spare, giving it to a family member or throwing it away - will likely be driven by the ease of doing so, the luster of owning a latest model device and the trade-in value on offer.

What’s the future of smartphone trading?

We expect the market for acquiring second- (or third- or fourth-) hand devices to become steadily more organised. A decade back, those wishing to sell their old phones would often use online auctions or marketplaces, which could be far slower and uncertain relative to being quoted a trade-in value at the point of sale, or simply swapping one phone for another with a leasing plan.

However in the future, specialist companies may emerge which forecast trade-in values after one, two or more years of ownership, similar to the equivalent service providers in the automobile industry.

Globally, we expect there to be significant variation in the practice of trading in smartphones by market.

Deloitte member firms’ research in 20 markets found the following:

  • As of mid-2015 approximately 12% of all consumers sold their smartphones
  • Of these, two-thirds sold their smartphones outright and a third traded them in with an operator or device manufacturer
  • In Singapore, about a quarter of smartphones were traded in
  • In Norway, Italy, Russia and Finland, only 5% were sold or exchanged.

Deloitte would expect that over time, most markets should see a steady increase in trade-ins.

Understanding the benefits of a second-hand smartphone market

For smartphone vendors the direct benefits of a thriving second-hand market are threefold:

  • First, encouraging an annual replacement cycle among a growing number of users may increase annual sales
  • Second, there would likely be a margin in processing used phones, similar to that earned by car dealers
  • Third, the availability of a formal second-hand market could make their devices more affordable to customers with smaller budgets, without having to create less profitable, budget variants of their devices. Used, refurbished premium smartphones may be more appealing than brand new unbranded devices.

Looking forward…

The smartphone is the primary consumer electronics device by revenues and units, and its second-hand market is becoming an increasingly significant market in its own right.

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