Trade-in (or buyback) programs for mobile phones and other consumer electronics are on the rise, spurred by Americans’ insatiable appetite for possessing the latest and greatest of any device. When combined with the desire to be sustainable and keep the planet “green,” it is the marketing equivalent of a slam dunk. A number of technologies and processes come together to create this new reverse logistics business model, which is still in its infancy. The landscape is changing fast, with opportunities at many stops along the supply chain.
The buyback market developed first around mobile phone hand sets – and for good reason. Four out of five Americans own a cell phone, and the global market is more than 1 billion units per year. The average “first life” of a cell phone in the U.S. is just 12 months. But as it gains momentum, the buyback movement is expanding to include MP3 players, digital cameras and other wireless units — and moving to absorb all small electronics. Charities were the first to successfully repurpose used units for specific causes (for example, for overseas soldiers or domestic abuse victims), and as could be expected, organizations like eBay consistently provide an active and steady market.
Today’s smartphones owe more to Bill Gates than to Alexander Graham Bell, and as small computers, they are subject to Moore’s Law. Basically, by the time it is out of the box, it’s obsolete. In the last 10 to 15 years, as the market has matured, manufacturers and marketers have collected the critical market intelligence necessary to gauge profitability in secondary markets. Entrepreneurs have jumped in to turn the data flow into cost-effective models that benefit all sides of the equation.
How It Works
There are multiple ways the transaction can play out, but the basic model is the same: the consumer returns a used item to a participating retailer or carrier. In exchange, he receives a cash value in the form of store credit or promotional card. With newly acquired capital, the consumer uses that credit to upgrade to a newer model, select another electronic device, or spends it elsewhere with the retailer. The transaction may occur in the store or online, depending on which promotional model the retailer or carrier has chosen.
The used devices are then picked up by a partner organization, such as Flipswap, which specializes in trading in mobile devices. The sets are wiped clean of any data, refurbished and resold in a secondary market, most likely overseas. Any waste is recycled responsibly. More on these back-end processes to follow in a minute.
Founded in 2005, Flipswap is one of the largest electronics trade-in companies, and it processed more than two million mobile phones in 2010 through its technology platform. Ray Young, Flipswap’s president of global services and chief technology officer, considers this the tip of the iceberg. “There are in excess of 150 million mobile devices on the used market, and the potential is tremendous,” he says.
The company, which recently secured a contract with one of the major U.S. carriers, uses its proprietary expertise to grade phones for refurbishment or recycle. “Approximately 10 percent go into recycle mode. The rest get reused,” says Young. “What we do is extend the life of a product and make it friendly to the environment.”
Flipswap’s software has the capability to integrate the point-of-sale system at purchase, so sales associates know exactly what to do – no snap judgments or time wasted searching for the unit’s value. The grading takes into account cosmetic as well as mechanical issues, while ensuring that retail partners are in compliance with laws regarding secondhand goods. There is no investment for the retailer other than the promotional costs.