As sales of new phones dwindle, secondhand handsets offer a resale profit over 300 yuan, three times the profit on a new iPhone.
Photo from CFP
By LU Keyan
China's phone market has fallen to its lowest point in a decade. Shipments in 2022 were about 286 million units, down 13.2 percent year on year, and the largest decline on record.
Retail stores and wholesalers have begun to furbish and reuse phones since the replacement rate slowed.
In Shenzhen’s Huaqiangbei, China's motherload of used phones, a wholesaler told Jiemian News that he began recycling this year. "The potential of mobile phone recycling is almost unlimited," he said.
As sales of new phones dwindle, there is a shift into the recycling business. An Apple store can collect up to 70 handsets every month, with a resale profit of over 300 yuan. That might not seem like much, but margins in the phone business are membranous. That’s three times the profit of a new iPhone and 10 times the profit of an Android.
The market for second-hand consumer electronics in China was 309 billion yuan in 2021. Phones made up 22.7 percent of that. Recycling now contributes more than 50 percent of the profits in thousands of stores nationwide, surpassing revenue from new phones, accessories and all other value-added services.
A used phone has great price elasticity. Vendors will constantly reduce the price of the phone and will choose good-quality phones for maximum profit. Apple phones, Huawei Mate30/40, and P40 series are the most popular, followed by the OPPO A5, Xiaomi 11 and Redmi K40.
In different channels, dealing with different people, the price of a used mobile is sometimes very different. A Huawei Mate 30 Pro with good basic functions has an estimated price of around 1,000, but in Huaqiangbei, many people bid more than 3000. A dealer who paid 3,300 to recycle the phone can sell it for 3,700.
The official recycling rate was only around 2 percent in 2021, compared with 30 percent in the US. Huawei, Apple, Samsung and others have trade-in services and are given discounts ranging from 500 to 1,000 yuan when customers trade in their old phones.
Due to the existence of professional recycling platforms, there is a relatively mature valuation process. Many small retailers go to the big platform to get a price estimate, then simply add a couple of hundred yuan. But if businesses scale up, this kind of reckless pricing will be eliminated. Standardization will become the trend.
More than 400 million used phones are generated in China each year, more than 80 percent of which are unwanted.
But recycling is a savage market with considerable profits, but also a considerable black box operation space. There will always be some small faults in secondhand phones that are difficult for consumers to detect.
