Reuters received details of the plan from a person “with direct knowledge” of the matter. Samsung is already working through the details and is preparing to start the program early next year. It will source phones to refurbish from its one-year upgrade programs offered in markets such as South Korea and the United States.
These allow consumers to get a new phone every year on a rolling contract. When the phone is returned at the end of the year, Samsung will refurbish it. It will then sell the device on at a discount. The cost of the used handsets or the markets they will be offered to has not been revealed. Samsung is likely to target emerging regions that cannot currently afford its premium devices, selling year-old handsets at a significantly lower cost.
The price of a refurbished phone varies depending on its original market value. When done correctly by the manufacturer, a refurbished device can be as good a choice as a brand-new one. The phone is typically fitted with a new exterior case and a new battery when it arrives for refurbishment, giving the purchaser the same experience as if they’d bought it new. The phone has no obvious indications of being a refurbished device, aside from the significantly lower cost.
Apple already runs an iPhone refurbishment program. It sells used devices at a discount to markets where consumers can’t afford its high prices. By introducing its own scheme, Samsung will be able to rival Apple in these regions. Refurbished high-end products appeal to people who are just getting online, providing a powerful device that will last for years.
Reuters cited a Deloitte report that predicts used smartphones will account for eight percent of all sales this year. The market will be worth over $17 billion, a figure that has become too large for Samsung to ignore. Over 120 million devices are expected to be traded in to manufacturers and mobile networks in the next 12 months. Instead of being sent to landfill, increasing numbers of handsets are being prepared for a new life overseas.
Aside from gaining a presence in emerging markets, refurbishment programs also allow companies to generate revenue from old devices. Few people in the United States or Western Europe will buy a Galaxy S5 or S6 today because the S7 has been available for months. Samsung has to sell its year-old handsets at a significant price reduction, regardless of the market it offers them to. It has a far better chance of actually selling the phones if it sends them out to less digitally-developed areas.
The program could also allow Samsung to defend against the rising power of budget Chinese manufacturers. The increasing market dominance of brands such as Huawei, ZTE and Xiaomi is proving to be an issue for Samsung. Its premium devices are losing out to lower-cost alternatives that are more affordable to buy new.
As the importance of used handsets grows, it’s likely that more manufacturers will develop their own refurbishment programs. From 2017, Samsung should be ready to rival Apple, prepared to sell its high-end handset at a discount if it means more revenue overall. Apple’s program has proved to be a success, although it still hasn’t successfully entered India. The country is likely to be a major target for Samsung as a recent report predicted the country will gain almost 350 million smartphone users in the next four years.
