Doxxing second-hand mobile phone industry: platform providers are expanding frantically, and small stores are making super new profits from old machines
Source of this article: Times Weekly Author: Wang Ting
High-priced recycling Source: Times Weekly
When the development of smart phones enters a bottleneck period, it is the second-hand market that goes up against the trend in sync with the high-end market.
"Second-hand mobile phones are more profitable, with fast delivery and large volumes. Whatever makes money, I will definitely do it, and I focus on second-hand mobile phones. Xiong Siguo, who is still preparing to close his store in 2022 and change his career, has now found a new way out.
Xiong Siguo opened a brand mobile phone store in a small county town in Hubei, he told the Times Weekly reporter that now there are more than a dozen or even more than 20 second-hand mobile phone sales per month, which is several times that of new phones, and sometimes the new machine sells only 1 unit a month, and the profit is not higher than that of a second-hand phone.
The county where he is located is very small, with a north-south and east-west span of less than 6 kilometers, but there are more than ten companies doing second-hand mobile phone business. As far as Xiong Siguo knows, some merchants have completely given up selling new phones and only do second-hand mobile phone business.
"Now there are basically mobile phones and operators who do business, and no one will not do second-hand. An investment manager who works on a second-hand mobile phone trading service platform told a reporter from Times Weekly that the profit from the sale of new machines is too thin.
According to an analysis by the International Data Corporation (IDC) in a report at the end of 2023, the sales profit of second-hand smartphones is higher than that of new phones, so more channel stores are actively entering the second-hand smartphone market.
For example, the number of physical stores has increased from more than 700 at the beginning of 2021 to about 2,000 in October 2023, and since 2021, the number of offline stores has increased from zero to about 500 at present, and B2B service providers are also "crazy" expanding their franchise network, such as about 1,200 franchise stores signed by Liangjihui.
In addition, love recycling, turning, quick recycling, etc. are vigorously promoting door-to-door recycling services, allowing users to consign second-hand mobile phones without leaving home, major mobile phone manufacturers, major e-commerce platforms are gradually increasing their efforts to promote the trade-in, and recently engaged in trade-in business and second-hand mobile phone sales of Shenzhen Flashback Technology Co., Ltd. (hereinafter referred to as "Flashback Technology") also submitted a prospectus to the Hong Kong Stock Exchange.
However, the second-hand mobile phone market has not been popular with capital for the time being. Guo Tianxiang, a senior analyst at IDC China, told Time Weekly about the reason, saying, "The market still lacks unified standards, and there is low transparency and unified regulation." ”
01 "The profit of second-hand mobile phones is not lower than that of new mobile phones"
More than 20 years ago, Xiong Siguo began to work in mobile phone repair, and in 2007, he began to sell mobile phones, and he witnessed the change of the times from feature phones to smart phones. Now we are experiencing the rapid development of the second-hand market.
JD.com's physical stores also do mobile phone recycling Source: Times Weekly
In the summer of 2022, Times Weekly contacted Xiong Siguo, he had plans to close or transfer the store at that time, and the sales of new phones within 20 days were 0, because there were too many stores, the competition was too fierce, and the demand for mobile phone markets was declining, the industry was in a deep winter, and the low-end market was the hardest hit area, which was the market he was in.
At that time, he was barely supported by scattered businesses such as selling accessories, second-hand mobile phones, elderly machines, and repairs. Twenty months later, in March 2024, when a Times reporter contacted him again, second-hand mobile phones had become his main business, a source of half of his monthly income.
The second-hand mobile phones he sells mainly come from upstream wholesalers, and a small part comes from his own recycling, if the recycled mobile phones are used in a problem, he will repair them and sell them at a higher price.
"Now no matter what you do, you need a smart phone, even the grandfather who sells vegetables needs a smart phone to collect money. Xiong Siguo said that second-hand mobile phone buyers are mainly working-class and middle school students, and some students bought a second-hand mobile phone with 1288 yuan, Xiong Siguo asked him why he didn't use the money to buy a new phone, the student said he liked this mobile phone, saying that the same style of new machine costs more than 2000 yuan, and second-hand is more cost-effective.
Today, the sales of second-hand mobile phones in his store can reach more than 10 or even more than 20 units per month, which is much higher than the summer of 2022 and much higher than the new phones.
According to the third quarter report released by the market research agency "GfK China", the average price of China's mobile phone market has reached 3,480 yuan.
Grassroots shopkeepers like Xiong Siguo, the wholesale price is controlled by upstream agents, and the retail price is subject to the official website price of the brand, even one or two hundred yuan lower than the official website price, so the profit of the new machine is relatively low.
However, there is no such restriction in the second-hand mobile phone business, and the price of second-hand mobile phones sold in Xiong Siguo's store is mostly between 400 yuan and 700 yuan, although it is far lower than the price of new phones, but the profit is not lower than that of new phones. He revealed that the profit of each second-hand mobile phone is at least 80 yuan, and the maximum profit can reach 300 yuan, and the maximum profit of the new machine is only about 300 yuan.
02 Non-standard goods, the market has not been monopolized
Mainly engaged in the second-hand mobile phone business, Xiong Siguo was forced by the cold winter of the industry and had no choice but to do so, while Yu Yang, a businessman in Guangxi, took the initiative to choose, and he saw the opportunity of the "reckless era" in this market.
He started a second-hand mobile phone business in 2022, and the sales model is very different from Xiong Shikoku, mainly online.
In an interview with a reporter from Times Weekly, he said that he operates self-media accounts on platforms such as Douyin, Toutiao, and WeChat public accounts, and cooperates with salespeople who sell second-hand mobile phones to attract fans to salespeople, and they get their own shares, and the share of a single unit is generally between 50 yuan and 100 yuan. As far as he knows, most of the peers who sell second-hand mobile phones independently can make a profit of 100 yuan to 300 yuan per unit.
He used to do a new machine wholesale business in Huaqiangbei, and the profit of a single unit was only 5 yuan to 10 yuan, winning by quantity, so the investment was large, the monopoly was strong, and it was controlled by the head company. In his opinion, the second-hand mobile phone industry has not been monopolized, the investment is small, and ordinary people can do it.
And he believes that second-hand mobile phones are non-standard products, and there are differences between each other in terms of wear and tear, component damage, and new and old styles, which tests the trust of customers in the business, and it is difficult to be monopolized in the future.
Retail, wholesale, and maintenance of new mobile phones, and operator business such as mobile phone numbers...... Like Xiong Siguo and Yu Yang, too many mobile phone-related practitioners have shifted their business focus to second-hand mobile phones.
A few days ago, a reporter from the Times Weekly visited a street in Longgang District, Shenzhen, walked about 1 kilometer, and saw three stores in a conspicuous position to promote second-hand mobile phone recycling business, and all of them were second-hand mobile phone sales.
Mobile phone repair shops that joined the second-hand mobile phone market Source: Times Weekly
"Due to the large competition in the new phone market and the decline in profits, there are indeed many offline stores that have turned to or doubled as second-hand mobile phones in recent years. Since the price of used phones is not transparent, sometimes the profit is higher than that of new phones. Guo Tianxiang observed.
According to the official website, since its establishment in 2020, the total annual order volume has increased by 20 times, and GMV has increased by 15 times.
03 Five-fold increase in two years, rapid expansion of brand franchise stores
Data shows that since 2021, large enterprises or brands have started the rapid expansion of offline stores and continue to open new stores.
According to Frost & Sullivan's research, it is estimated that Aihuishou, Zhuan Zhuan and Flashback Technology are the top three mobile phone recycling service providers in China in 2022 in terms of total transaction value. They are all expansion strategies in online channels, among which Aihuishou and Zhuan Zhuan have a large number of franchise stores.
In addition, there are many recycling vendors who are contracted franchisees of second-hand mobile phone B2B service provider brands such as Liangjihui, Guokuai Recycling, Wanlixing, etc., with similar models, vendors pay franchise fees, and there are obvious brand logos inside and outside the store.
Within two kilometers of the aforementioned three stores, there are physical stores of Aihui, Zhuanzhuan, and Guokuai Recycling, the operation center of Liangjihui Longgang Branch, which has expanded to Shenzhen, and the offline stores of Flashback Technology.
According to a February 2021 report by China Daily, Aihuishou has opened more than 700 physical stores in 140 cities across the country, and according to a foreign media report in October last year, as of 2023, Aihuishou operates 1,944 physical stores in 269 cities across the country. Both of these reports were reprinted on the official website of Aihuihui.
Zhuan Zhuan originally focused on online second-hand mobile phone sales, but company insiders told the Times Weekly reporter that Zhuan Zhuan began to do offline stores in 2021, and the current number of stores has reached about 500. In November 2022, this figure was still less than 200.
Flashback Technology has also entered the game, it is a trade-in service provider, for mobile phone brands, large distributors to purchase second-hand mobile phones and sell. In September and December 2023, it opened its first and second offline retail stores in Shenzhen under the Flashback Youpin brand, directly targeting consumers for the recycling and sale of second-hand mobile phones.
Second-hand mobile phones sold in the main repair store Source: Times Weekly
As for B2B service providers, Liangjihui, established in 2018, has signed more than 200 franchisees by the end of 2021, and has increased to about 1,200 as of January this year, covering 31 provincial-level administrative regions across the country.
Xiong Siguo said that the network of B2B service providers has extended to the small county town of the 18th line, where he is located. The mobile phones he recycled not only sold themselves, but also sold some of them to B2B service providers at a lower price, because it was a one-shot deal, and customers would not come to the door because of problems with their mobile phones.
The second-hand mobile phone business is booming, and he plans to invest a sum of money to become a regional agent or franchisee that large enterprises rely on.
04 The new machine "fell", and the second-hand mobile phone market was "full"
Why is the second-hand mobile phone recycling industry developing so rapidly? It can be seen from two levels: supply and demand.
From the perspective of supply, data from the China Association of Circular Economy shows that the average lifespan of a mobile phone is about 2.2 years. On average, the mainland produces more than 400 million used mobile phones every year, and the stock of used mobile phones exceeds 2 billion.
"In some areas, such as Shaanxi, many self-employed people directly exchange low-end mobile phones with users such as plates and kitchen knives, which is very profitable. Yu Yang said that many people's idle mobile phones don't know how to deal with them, so they are handed over to such self-employed people.
A resident in the suburbs of Guangzhou told the Times Weekly reporter that there are often such vendors who come to her urban village, and some neighbors use old mobile phones to exchange washbasins and scissors, but she is reluctant to change them.
As for demand, Liu Hui, an insider of the head enterprise in the second-hand industry, said in an interview with Times Weekly that in recent years, users have paid attention to cost performance, and their acceptance of second-hand mobile phones has become higher.
According to her observations, the penetration of second-hand mobile phone recycling networks and retail networks, as well as the intervention of Internet platforms such as Zhuanzhuan, have also enhanced the standardization and convenience of the industry as a whole. In addition, with the development of technology, mobile phones are more durable than before, and in the early years, mobile phones may have been stuck after two or three years of use, but now they are not.
Guo Tianxiang also said that with the improvement of product quality and durability, the gap between the use experience of second-hand mobile phones and new machines is narrowing, especially the second-hand flagship models, which will become the most suitable "replacement products" for mid-range new machines. The economic downturn has also made some consumers choose cheaper second-hand products.
"If you buy less new phones, people will definitely buy second-hand phones. In the view of second-hand mobile phone dealers, the growth in demand for second-hand mobile phones is related to the decline in demand for new mobile phones.
Xiong Siguo mentioned different levels of demand for second-hand mobile phones, according to his observations, some low-end second-hand mobile phones do not sell well in first-tier cities, but they are very popular in small counties;
According to the IDC report, in the fourth quarter of 2023, China's smartphone market shipped about 73.63 million units, a year-on-year increase of 1.2%, a slight rebound, after 10 consecutive quarters of year-on-year decline.
At present, in order to improve user stickiness, major mobile phone manufacturers and e-commerce platforms are promoting trade-in, taking vivo X Fold3 released in late March as an example, vivo provides up to 2000 yuan of trade-in subsidies, Huawei nova 12 series launched at the end of 2023, the price starts at 2499 yuan, and Huawei's trade-in maximum subsidy is 500 yuan.
A mobile phone store on the street that trades in the old Source: Times Weekly
05 Is the second-hand mobile phone platform popular?
According to Frost & Sullivan's information, second-hand mobile phones have been in short supply in the Chinese market and are expected to remain so in the future. In the second-hand mobile phone recycling industry, the average inventory turnaround time is about 10 to 15 days.
However, second-hand mobile phones, which are in short supply, have not brought huge returns to the platform. The recent financial statements of large companies such as Aihuishou and Flashback Technology all show unrealized profits.
In the first three quarters of 2021, 2022 and 2023, Flashback Technology achieved operating income of 750 million yuan, 919 million yuan and 836 million yuan respectively, and the corresponding net losses during the period were 48.708 million yuan, 99.084 million yuan and 99.114 million yuan respectively, and the losses were expanding year by year, with loss rates of 6.5%, 10.8% and 11.9% respectively in the three reporting periods.
During the reporting period, the gross profit margin of Flashback Technology also decreased year by year, which was approximately 8.2%, 6.1% and 7.3% respectively. Regarding the reason for the decline in gross profit margin, Flashback Technology said that it was affected by the increase in the cost of purchasing second-hand consumer electronics.
As the first listed company in the same track, Aihuihui, that is, ATRenew, will still be in the loss period in 2023, although its operating loss has shrunk from 2.624 billion yuan in 2022 to 173 million yuan.
However, even so, the agency is still optimistic about the prospects of this track.
According to Frost & Sullivan, from 2018 to 2022, China's second-hand consumer electronics trading market increased from 143.8 billion yuan to 424.8 billion yuan in terms of circulation transaction value, with a compound annual growth rate of 31.1%, and mobile phones accounted for most of the market share in all consumer electronics categories, with 75% in 2022.
Frost & Sullivan predicts that the size of China's second-hand consumer electronics trading market is expected to reach 1,452.1 billion yuan in 2027, with a compound annual growth rate of 27.9% from 2023 to 2027. Although China's mobile phone recycling rate has grown rapidly from about 8.5% in 2018 to about 27.5% in 2022, there is still a lot of room for improvement compared to the mobile phone recycling rate of about 50%-70% in mature markets.
IDC predicts that the second-hand mobile phone market in the Chinese market will be about 80 million units this year.
(Xiong Siguo, Yu Yang, and Liu Hui are pseudonyms in the article)