Customers eye refurbished devices as new phones get costlier

New Delhi: An increase in the average selling price (ASP) of smartphones in India is driving more users in the country towards buying refurbished smartphones. Even as the overall demand for smartphones and other electronics products has contracted, analysts expect the refurbished segment to grow at a rate of 18% in 2022 as consumers look for cheaper offerings.

“Last year, about 55 million refurbished phones were sold in India. This year, this number is expected to grow to around 65 million by end-2022,” said Siddharth Surana, engagement manager at market research firm, Redseer Consulting. He noted that though this would be a lower growth rate than last year, it would still mark a healthy rate of growth for the industry.

Further, Glen Cardoza, a senior analyst at market research firm Counterpoint India, said that while the sharp rise in demand last year was due to a pent-up demand in light of easing covid-19-related concerns, this year, the growth in the number of refurbished smartphones in India could be attributed to the increasing selling price of new smartphones.

According to a quarterly report by the International Data Corporation (IDC), ASPs of a new phone rose by 15% year-on-year in the quarter ended June 2022. The firm said that ASPs had reached around Rs. 17,000) this year, up from around Rs. 13,500 last year. The total shipments of smartphones also declined during this time, as brands struggled with supply chain troubles.

On the other hand, Nakul Kumar, chief marketing officer and co-founder of refurbished electronics marketplace Cashify, noted that ASPs of used devices have largely remained constant over the past year. “If buyers had a certain budget for a phone before, they are willing to spend that on a refurbished phone — which offers them a better feature set than what a similarly priced new phone today would,” he added.

According to Counterpoint’s Cardoza, the ASP of phones in the refurbished space starts from around ₹5,000 for the entry-level devices, and goes up to around ₹12,000 for a more feature-packed device.

That said, while price is one of the factors fuelling the rising demand for refurbished phones, the timeline of India’s 5G rollout is also a contributing factor.

“Since the demand for buying phones among consumers has fallen, brands need some avenue to stop their finances from steadily declining. A higher priced phone offers higher margins, but not all of these devices have been 5G devices.”

He added that the lack of 5G connectivity in a more expensive smartphone is something that puts buyers off. As a result, consumers are opting for a refurbished phone at a lesser price, which would serve them for at least around 18 months.

“A wider 5G rollout in India is only expected to take place by the end of next year, so a refurbished phone, which is typically about two years old (and therefore lacks 5G connectivity) does not pose a hindrance for not being 5G-compatible,” he said.

Redseer’s Surana added that the margin for retailers selling refurbished phones average at around 8% — which is significantly higher than the margin retailers earn from selling new phones. This makes used phones an increasingly active market in India, which according to Redseer’s report on the matter published in May this year, is set to grow 10x — up to $10 billion in net valuation by 2025.