With western smartphone markets in steep decline the secondary market is gaining traction as a counter-intuitive way to reverse that trend.
On first inspection a vibrant secondary (i.e. used) smartphone market seems like a threat to sales of new phones. Why would you bother buying a new one when you can get a decent second-hand one for a fraction of the price? But dig a bit deeper and you can just as easily conclude that making it easier for people to flog their old phones could incentivise them to upgrade more frequently.
The latter position is one adopted by smartphone security specialist Blancco, which has just published a report entitled ‘The Critical Importance of Consumer Trust in the Second-Hand Mobile Market’. The report is based around a survey of 5,000 punters from the UK, US, Germany, India and the Phillipines, which looked into their attitudes towards the secondary smartphone market.
As with all reports published by a company with a product or service to sell, it’s safe to assume there is a business reason for such an undertaking. In this case one of the things Blancco does is manage the data erasure on used devices when they’re collected to make sure no consumer data is hacked/breached/misused, so they have an interest in generating demand for such a service. That said, let’s have a look at the findings.
58% of those surveyed had never traded in a device and in the first table below you can see the stated reasons why. Cutting to the chase, people were then asked how concerned they were about their data security if they were to flog their old phone and, as you can see from the second table, the majority of people in all the countries surveyed had at least some concern.
“The secondary mobile device market is a huge success story,” said Russ Ernst, EVP, Products & Technology at Blancco. “Each of its major stakeholders – operators, OEMS and 3PLs [third party logistics] – have so much more value to extract from it as more global consumers choose to sell or buy used equipment if they trust in the process of used device collection and redistribution.
“Without a common, mandated and regulated rule book for smartphone processing, the ecosystem will be subject to abuse and malicious attack. The current ecosystem is made up of multiple stakeholders that collect devices from various touchpoints and redistribute them to many other parties.
“Since the speed of device processing is the only critical success factor, and as more devices flood the market, the chances of data breaches or issues related to data misuse will become increasingly likely. The secondary device market remains an amazingly lucrative and exciting opportunity for everyone, but only if it retains full consumer confidence built on trust and data integrity.”
Apple is being especially proactive in the secondary market by letting its loyal punters trade in their old iPhones as part of the price of a new one. The UK trade-in page makes it very easy to get a valuation and cleverly they will even accept non iPhones. Having said that they’ll only give you £445 for a 64GB iPhone X that they can resell for twice that amount so they’re not being that generous.
But Blancco does seem to have a point about the growing secondary market and it stands to reason that trust plays a big part in it. Presumably Apple fanboys are more likely to trust Apple itself than their operator or some random third party. While we don’t accept it as a given that a strong secondary market necessarily equals a strong primary one, it looks like there’s at least some money to be made from being a trusted reseller.
The second-hand mobile device market is a big and lucrative success story. Mobile operators, OEMs and third-party logistics providers (3PLs) therefore remain committed to its ongoing success. This global study from Blancco underlines the significance of safeguarding consumer trust in the used device buyback process and warns against complacency when it comes to keeping consumer data secure.
Download the report to find out more.
Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Alan Bentley, President, Global Strategy at Blancco looks at the success of the secondary device market but warns against data security complacency.
The secondary smartphone market continues to grow, delivering new revenues and new opportunities to every one of its stakeholders. In fact, according to Counterpoint Research, the market for refurbished smartphones is now growing faster than for new smartphones. A staggering 140 million used devices have now been collected for redistribution. Last year, according to Persistence Market Research, the secondary device market was worth US$19 billion, and is set to more than double in size and reach a valuation of US$44 billion by 2026. That’s impressive scale for a process that started to keep used old devices out of landfill (which remains a critical focus for the secondary market today).
Big business, but time is money
From an operator perspective, the secondary device market is big business. Revenues extracted by unlocking the latent value of old devices is one of the few revenue streams available to them which continues to grow. This is a big deal given how hard new revenues are to come by, and the cannibalisation that has impacted many of their core service revenues from voice, data and messaging.
Operators and OEMs that manage device BuyBack processes, either directly or through partners, can, on average, extract between $100 and $300 per smartphone according to its model, age and condition at the point of upgrade. Realising optimal value depends on how efficiently an operator can process a used smartphone. It begins at the point of collection, goes through diagnosis, repair and refurbishment before being prepared for re-distribution. Put simply, with mobile device processing, time is money. The longer it takes to process a used smartphone, the more of its latent value it loses. Operators, OEMs and the third-party logistics providers that serve them both are all incentivised, therefore, to make marginal gains at every opportunity to protect optimal value.
Efficiency matters, but not as much as customer data integrity
Operators, OEMs and third-party logistics providers have fine tuned mobile processing. While the process from device collection to re-distribution is very involved, it is not unusual to be able to process several hundred devices each day. Typically, the process includes automated device testing, identifying key locks and determining device value. It then quickly and securely erases data stored on each device using properly scoped hardware and configuration, all in line with the necessary certification guidelines. Ideally, each device will then be given a certified tamper-proof audit trail, backed by a certification of data erasure.
With so much focus on operational efficiency, there will always be a temptation to dispense with some of these key steps. At present, the secondary device market is light on regulation. In North America, the leading global market for used smartphone collection, there are the R2 standards. These unite the leading carriers, OEMs and third-party logistics providers behind some common rules – but they are not a mandate, merely guidelines. In truth, pretty much every player in the secondary device ecosystem is R2 compliant – they have to be in order to do business with each other. However, R2 guidelines were not created with the collection and processing of used smartphones in mind, leaving many to consider their relevance and applicability to the larger, much more significant ecosystem that exists today. For example, R2 states that performing a ‘factory reset’ on a device is sufficient in ensuring all data is fully erased. In some cases this is true, in many others it isn’t.
Not a time for complacency
Without a common, mandated and regulated rule book for smartphone processing best-practice, the ecosystem will be subject to abuse and malicious attack. Let’s be clear, the secondary device market has functioned perfectly well up until now. R2 and other standards have done their job, consumer data has, in the main, been preserved. The current ecosystem is made up of multiple stakeholders, who collect devices from various touchpoints and redistribute them to many other parties. Since the speed of device processing is the only critical success factor, and as more and more devices flood the market, the chances of data breaches or issues related to data misuse will become more and more likely.
If operators or OEMs want a lesson in the damage caused by data breaches and the misuse of customer data, they need only look at Facebook. Operators have built a strong sense of trust with their customers – they have historically been reluctant to offer freemium services in return for customer data that can then be resold. This leaves them ideally placed to capitalise on this goodwill, create a raft of new offers and partnerships and target their customers with new digital services. This opportunity will only exist if they remain diligent to all threats and focused on the responsible management of customer data. The secondary device market remains an amazingly lucrative and exciting opportunity for everyone, but only if it retains full consumer confidence – confidence that is built on trust and data integrity.
Alan Bentley is President, Global Strategy at Blancco. He joined the company in October 2016 as VP of Sales, EMEA and more recently, has taken on the role of President of Global Strategy. In this role, he is responsible for overseeing sales efforts globally. As an industry veteran, Alan is responsible for leading the sales teams to develop sustainable and scalable revenue growth. Since joining the company, Alan has worked closely with Blancco’s many customers and partners to implement data erasure solutions to mitigate security risks and ensure regulatory compliance. This gives him a unique insight into the market and business requirements driving the needs of today’s businesses.