Second-hand phones have been the growth sector in the mobile market over the past few years. While shipments of new devices first plateaued and then began to fall, sales of used phones have been showing strong growth since the first half of this decade.
In fact, many analysts attribute the decline of the new phone market at least partly to the rise in demand for pre-owned handsets.
However, forecasts now predict that sales of new devices will recover in 2020, buoyed by the emergence of next-gen 5G smartphones. According to Gartner, sales of smartphones have declined by 3.2% in 2019, the worst annual performance since the first iPhone was launched. But in 2020, it expects the smartphone market to recover by 2.9%, largely on the back of the launch of the first 5G networks.
So if sales of new handsets are to see an uplift, where does this leave the used phone market?
Getting a conclusive picture of how the second-hand phone market is likely to perform is not straightforward as there is a lot of conflicting information out there. Back in 2016, for example, IDC said it expected the global used smartphone market to grow at a rollicking 22.3% CAGR all the way to 2020, by which time there would be 222.6 million pre-owned devices sold, with a total market value of $30bn.
By contrast, Counterpoint has said it expects the refurbished phone market to increase by just 2% in 2019. Based on its figures for sales in 2018 (140 million) and the same rate of growth in 2020, that would mean a total of 145.7 million devices sold next year.
How will the market grow?
So which do we go with? We decided to make our own predictions, based on known sales figures of used phones worldwide since 2014, analysing the year-on-year percentage change, and then seeing if we could extrapolate this to make a reasonable forecast for 2020. See Table 1 below:
Notwithstanding the fact that we couldn’t find reliable figures for 2016 and that the data has come from various sources, we can say two things about these figures. One, we can say that the overall CAGR between 2014 and 2018 was 20.11%, so Counterpoint’s figure of 2% growth in 2019 seems low. But we can also see that the growth rate is declining.
By carrying on the deceleration in that growth rate, we would expect to see the number of pre-owned phones sold worldwide in 2019 increase by 11%, and then grow again by around 8.5% in 2020. Taking the 140 million devices Counterpoint says were sold in 2018, this would translate to 155.4 million used phones sold in 2019, and 168.6 million in 2020.
When looking to run a similar model for the value of the used phone market, we found things were complicated by the fact that different analysts define value in different ways – Deloitte, for example, talks about the value of all phones sold AND traded in, while Gartner uses the wholesale value of pre-owned phones as a reference point. While not the most scientific approach, to give some sort of indication we ran our modelling for year-on-year percentage growth from second-hand unit sales to market values, as follows.
Starting with Gartner’s assertion that the global used phone market was worth $14bn in 2017 incremental growth of 16.67%, 11% and 8.5% would put the pre-owned phone market at $19.67bn. Based on Deloitte’s claim that the market was worth $17bn in 2016, similar calculations would give a value by the end of 2020 of around $29bn – remarkably similar to the figure IDC came up with back in 2016.
What we can say is that the used phone market is very likely to continue to see extremely positive growth into 2020 and beyond. And whatever bump 5G devices give to the sale of new smartphones, the second-hand market will establish itself as a $20bn-plus global market, with continued growth beyond that to be expected.
If your business is looking to enter the used phone market, or you are already in the used phone arena and looking for a new, reliable supplier with an industry leading RMA process, contact our trade sales team today on +441270 449999.