Counterpoint Conversations: AI Putting the “Smart” in Smartphone Trade-Ins

The secondary smartphone market is surging due to growing demand for pre-owned devices, aggressive trade-in programs from carriers and more. There are several other factors driving this trend, which Jan Stryjak, Associate Director at Counterpoint Research, and Biju Nair, EVP and President, Assurant, sat down to discuss at MWC 2024. The conversation also touches on the role of AI in the secondary market.

The Interview

Key takeaways from the discussion

Surging demand for pre-owned devices:

• More and more consumers are looking for affordable alternatives to new phones.
• Certified pre-owned devices guarantee both quality and warranty at a fraction of the cost.
• Aggressive and high trade-in values offered by carriers on used devices is encouraging consumers to upgrade to newer smartphones more frequently.

AI in secondary market:

AI is increasingly being used to grade the cosmetic condition of the used devices.
• It helps in ensuring accuracy and consistency in the grading process, which eventually helps both buyers and sellers.
• The use of AI also helps in improving productivity.

Regional dynamics:

• Japan: The secondary smartphone market grew from 6% in 2019 to around 15%-18% in 2023. The increase in prices of new devices and the decline in the value of the Yen are some factors contributing to the growth.
• Europe: While the secondary smartphone market in Europe is growing, it is not growing as fast as in other regions. Several factors are at play here, such as lack of aggressive trade-in offers from carriers, fragmented market and uncertainty around sustainability regulations for importing used devices.
• US: It is a matured and large market for pre-owned devices. Aggressive trade-in programs from carriers are helping the market grow.

Analyst takeaways:

• The global secondary smartphone market is steadily growing for a number of reasons, including increased availability and quality of second-hand devices, improved trade-in programs, and challenging financial conditions resulting in people increasingly choosing a cheaper refurbished smartphone instead of a brand new one.
• However, this growth cannot last forever, and in fact is flattening in some regions like Europe. Consumers are holding on to their devices for longer than ever before, which not only slows down sales of new devices, but also reduces the supply of second-hand devices. Meanwhile, limited availability of parts and practices like part-pairing are making repairs harder. The market also needs to adapt to changes in regulation.
• Despite these hurdles, the new smartphone market is expected to see a modest recovery over the next few years as macroeconomic conditions improve and new device innovation adds stimulus to the market. This should, in turn, help with the supply of second-hand devices. Consequently, we expect refurbished smartphones to continue to steadily grow in both sales and share over the next few years.

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