Beginning “as early as next year,” Samsung may start selling refurbished smartphones directly to consumers. The new resale program is aimed at strengthening Samsung’s earnings as global phone sales slow down, according to report today citing “a person with direct knowledge of the matter.”
Offering lower-cost refurbished phones could also help Samsung better compete against Chinese manufacturers whose cheap devices have cut into its sales, especially in developing markets.
The report from Reuters from comes on the heels of Samsung’s latest smartphone release, the Galaxy Note 7. While the Note 7 has earned strong reviews, it’s also noteworthy for its steep price, which starts at $849.99. By comparison, the company’s flagship Galaxy S7 (pictured above) and the Galaxy S7 Edge, launched earlier this year, are priced starting at $670 and $770, respectively.
Resale a ‘$17 Billion Market’
Samsung plans to refurbish and resell high-end devices that come back to the company from customers on one-year upgrade programs that are offered in the U.S., South Korea and other markets, according to Reuters. No details were available on how refurbished phones would be priced or how many might be made available.
The report cited research from the financial services firm BNP Paribas that said the average resale value of a refurbished Samsung Galaxy phone is about 51 percent of its original price, compared to the Apple iPhone’s higher resale value of 69 percent. Reuters noted that Apple does not provide detailed sales information about refurbished iPhones.
In a forecast for 2016, the auditing and advisory consulting firm Deloitte called the sale of used smartphones “the $17 billion market you may never have heard of.” It predicted some 120 million used smartphones would be resold this year, compared to the 80 million sold in 2015.
Deloitte noted that smartphone vendors gain several benefits from a strong resale market. It said resales encourage some smartphone owners to replace their devices with new ones, which boosts vendor revenues. A strong secondhand market also makes devices more affordable to buyers on lower budgets, so manufacturers don’t have as much need to create “less profitable, budget variants of their devices,” Deloitte added.
Rebounding Sales Figures
For Samsung, selling refurbished phones could provide another means of boosting its recently improved financial performance, Reuters noted. After several years of struggling earnings, last month Samsung reported second-quarter earnings that were its best since early 2014. The company attributed the positive results to strong sales of the Galaxy S7 and S7 Edge, as well as to a “streamlined mid- to low-end smartphone lineup.”
In its earnings report, Samsung said that it expected sales to remain “solid” into the third quarter of this year. The company said its aim was to focus on improving year-over-year earnings growth by strengthening its lineup of high-end smartphone and “maintaining solid profitability of mid- to low-end products.”
Reuters noted in its report today that Samsung’s entry into a resale program could interfere with those business goals. “The risk of offering refurbished devices is that they could potentially cannibalize sales of Samsung’s other mid-tier devices,” according to Reuters.