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Refurbished Handsets Look to be Next Market for World’s Largest Device Maker

by Ken Hyers | Aug 22, 2016

News reports suggest that Samsung is poised to become the next handset maker to enter the refurbished devices market, in 2017. The world’s largest mobile phone maker launched a smartphone leasing program in several markets around the globe in early 2016. The program, similar to Apple’s iPhone leasing plan, allows customers who sign a 24-month installment plan to upgrade their device for a new one after one year on the plan. With the first of those customers scheduled to trade up in early 2017, Samsung is planning to refurbish the high-end devices and resell them.

Strategy Analytics projects the global refurbished handset market will grow by 14% YoY in 2016, and will continue to steadily expand into the next decade, at which point it will be equivalent in size to more than 8% of the legitimate handset market.

Refurbished handsets offer a potentially lucrative way for handset vendors to drive volumes while selling the same device twice. We liken it to the car market in which a new vehicle is leased, and once returned following the term of the lease, is spruced up and sold as a certified pre-owned vehicle. As with cars the lease-to-refurbished market works best with high-end smartphones that best hold their value.

Samsung’s refurbished device program will see customers trading in their Galaxy S7 and S7 edge for the next generation device from the vendor. After the device is refurbished, it will be sold to customers that aspire to own the company’s premium handsets but have been unable or unwilling to pay the +$800 (retail) price tag for the flagship smartphone.

Some observers have speculated that a refurbished device program risks cannibalizing Samsung’s new device sales. But carefully managed, a refurbished device program that specializes in offering premium devices could allow Samsung to reach new customers that might otherwise choose a top-tier smartphone from a lower-cost competitor such as China’s Huawei, ZTE, Oppo, Xiaomi or LeEco.

We expect that Samsung’s refurbished S7 and S7 edge smartphones will be offered at retail prices only a little higher than the very top-end devices from its Chinese competitors. In this model Samsung’s Lease-Refurbish-Resell program not only allows it to sell the same device twice, it will also allow it to fend off attempts by a number of Chinese vendors who are seeking to move up the value chain and offer higher-priced (and higher margin) premium smartphones.

Customers of our Wireless Device Strategies research service can learn more about the Refurbished Handset market here.
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