Gazelle: US used smartphone market revenue is expected to reach $5 billion in 2015

July 30, 2013 With the rapid development of the second-hand smartphone market in the United States, US mobile operators have also begun to launch "trade-in" activities to upgrade old phones. According to Gazelle Inc., a US second-hand electronic device resale website, the annual revenue scale of the US second-hand smartphone market will reach US$5 billion in 2015.

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U.S. mobile operators are discovering new value in used smartphones.

Mobile operators have long hoped that consumers would throw old phones into drawers or pass them on to their kids, but the U.S. market for used iPhones and Android smartphones has grown so rapidly in the past two years that operators are beginning to tap into the high resale value of used smartphones.

Mobile phone upgrade activities

Recently, in order to stimulate the sales of smart phones, US mobile operators Verizon Wireless, AT&T and T-Mobile have announced plans to launch "trade-in" mobile phone upgrade activities. US mobile operators previously required users to upgrade to new phones only after paying for their existing phones. Now, they are confident that they can increase the speed of consumers' mobile phone product updates by launching new mobile phone upgrade plans.

"Many used smartphones have a cash value of $200 to $250," AT&T Chief Financial Officer John Stephens told analysts last week. "That makes sense for us to offer a trade-in program."

However, what exactly the move means for consumers and device makers is unclear. Some smartphone market observers have criticized AT&T and Verizon Wireless for making upgrades too expensive. And the strong demand for used smartphones also reflects that many consumers find used devices just as good. As the pace of smartphone innovation has slowed significantly, existing smartphone users are less likely to buy the latest version of Apple's iPhone or Samsung's Galaxy smartphone.

A new round of efforts to tap the discounted value of used smartphones may eventually lead the smartphone market to repeat the development path of the U.S. auto industry, which relied on "trade-in" to stimulate new car sales.

In the past, it was mainly sold overseas

For many years, the main sales market for used smartphones in the United States has been overseas. Although some used smartphones are sold through eBay or sold to wholesalers, the vast majority of used smartphones in the United States are packaged and sold overseas by professional wireless product distributors such as Brightstar Corp., with major sales markets including Asia, Africa and Latin America.

Brightstar CEO Marcelo Claure said the company has its own auction warehouse in Hong Kong, where hundreds of people bid in batches every day to buy second-hand smartphones. Brightstar has been working to convert on-site sales to electronic transactions, but buyers still prefer to inspect the second-hand phones on site before bidding. Claure pointed out that the number of second-hand smartphones traded in the warehouse every day reaches tens of thousands.

"In many parts of the world, consumers can't afford a new iPhone or a new Galaxy smartphone. But once they become used, even iPhones become cheap," said Claure. Brightstar expects to handle sales of more than 25 million used smartphones this year.

Professional Distributor

Gazelle Inc., a US-based resale website for used electronic devices, predicts that the annual revenue of the US used smartphone market will reach $5 billion in 2015. US mobile operators have been handing over the "trade-in" business of consumer phones to professional companies such as Brightstar and Gazelle. However, despite the rapid development of the used mobile phone market, it is still far behind the annual revenue of the US new smartphone market. According to statistics released by market research firm Strategy Analytics, the annual average revenue of the US new smartphone market is about $57 billion.

Gazelle CEO Israel Ganot said many consumers simply don't realize the value of used phones, in part because mobile operators often sell phones to consumers under contracts, which obscures the true value of the phone.

A basic iPhone 4 that cost $200 with a contract more than three years ago is now selling for $130 on Gazelle, while many U.S. wireless carriers are offering iPhone 4s for free with contracts.

Michael Graham of Missouri said he traded in four smartphones from AT&T when his family switched from Sprint to AT&T last year. He had sold his own used phones on eBay and had an idea of ​​what they were going for.

“When I buy a new phone, I always remind myself that I might someday resell it,” Graham said.

Or become a common practice

For US operators, the slowdown in smartphone upgrades will also have a significant impact on their revenue, because their main source of revenue in recent years is the data plans that consumers participate in when they upgrade from feature phones to smartphones. Even when contract subscribers participate in the "trade-in" program, the subsidies paid by operators for each device will be as high as about $400.

Following Verizon Wireless, AT&T also issued a notice last Sunday: Starting from June 9, AT&T will change its free upgrade service policy, and the service period for contract users to replace new phones with subsidized prices will be extended from the original 18 to 20 months to 24 months. The purpose of operators extending users' free upgrade period is to increase profit margins. By making users wait longer to upgrade their phones, AT&T can increase service fees by 4 to 6 months.

Verizon Wireless and T-Mobile declined to disclose their respective policies for phone upgrades.

"It will become a common practice for mobile operators to stimulate sales of new phones by allowing consumers to upgrade their old phones through 'trade-in'," said Gazelle's Ganault.