Used smartphones come out of the bottom drawer

Industry

Published: 02 Mar. 2022, 19:08 Updated: 02 Mar. 2022, 19:09

Used smartphones come out of the bottom drawer

Samsung Electronics rolled out the Galaxy S22 series on Feb. 25. [YONHAP]

From the start of the smartphone era, used devices usually ended up at the bottom of a bedroom drawer as the shiny phone with a new screen protector, spruced up design and jazzy functions took over.

These days, the market for used smartphones has never been bigger, and all kinds of companies are trying to get customers to dig into the dresser drawer and cough up their old phones.

“A customer just returned a Galaxy Note 10 device to get a new Galaxy S22 model,” said a 53-year-old branch manager at a KT store in Seongbuk District, northern Seoul. Samsung Electronics’ Galaxy S22 series hit the shelves two weeks ago.

The customer was taking advantage of KT’s used phone compensation program. The two other major mobile carriers – SK Telecom and LG Uplus – offer similar programs as a customer lock-in strategy, offering subsidies for returned smartphones.

“We provide a maximum of half the retail price of the device as a subsidy when the consumer returns the smartphone after using it for 24 months,” explained the branch manager.

The returned smartphones are sent by the phone companies to electronics recycling companies or sold to people who want cheap smartphones. While some find new owners via secondhand phone suppliers – such as KT’s Mint Phone, Pin Direct Shop run by Kakao’s Stage Five or domestic used phone website Ecofon – others are refurbished and resold overseas.

The secondhand mobile phone market is booming around the world. Used handset shipments totaled 225.4 million units in 2020, according to a 2021 International Data Corporation (IDC) report, a 9.2 percent increase from the previous year. They will reach 351.6 million units by 2024, up 56 percent from 2019, according to IDC.

In Korea, local secondhand smartphone company Mintit, a wholly-owned subsidiary of SK Networks, announced last December that it collected more than one million used handsets in 2021, more than triple the 300,000 units in 2020. Since Mintit began in 2019, transaction volumes increased 14 times.

Analysts say that budget conscious consumers realize that performance degradation in phones is much less than in the past due to improved devices with longer lifespans.

“Refurbished and used devices continue to provide cost-effective alternatives to both consumers and businesses that are looking to save money when purchasing a smartphone,” said Anthony Scarsella, research manager of IDC.

Smartphone manufacturers such as Samsung Electronics have launched their own trade-in programs, offering subsidies to customers buying new phones.

A customer uses Mintit's smartphone collecting machine. SK Networks' wholly-owned subsidiary Mintit accounted for 10 percent of the total transactions, or 100 billion units, in 2021, the company announced. [MINTIT]

SK Networks’ Mintit is now a major player in the secondhand smartphone supply chain. The company announced in December that it accounted for some 10 percent, or one million units, of all used phone transactions in Korea last year.

Mintit is known for its “Mintit ATM” service, through which people can sell their phones at an automated machine similar to a cash machine.

The company installed some 6,000 artificial intelligence (AI)-based ATM machines across the country over the past two years. If someone puts a used mobile device in the machine, it automatically assesses the device’s usability and external damage with its AI engine, and comes up with an appraised price.

A screengrab of CU's secondhand smartphone collecting service Refone. Consumers run a self-test on the Refone website before selling the device. [SHIN HA-NEE]

BGF Retail’s convenience store chain CU also introduced a used phone collecting service dubbed Refone in 2019. Users can run a test of the device through the Refone website to assess its condition and ship the device using CU’s delivery service.

While big corporations get in the game, many people still go to online secondhand marketplaces such as Bungajangter or Danggeun Market to make deals themselves.

In 2020, Bungaejangter introduced a service to allow people to check the market price of their phones. Its used smartphone transactions reached some 100 billion won ($83 million) in the first half of 2021, which made pre-owned mobile devices the most traded items on the platform.

If there's one psychological barrier to the business, however, it's privacy. Many people don't like surrendering devices that contained so much of their lives for a few years.

“I sold my old iPhone XR last May to a mobile phone retail outlet in Seoul,” said a 22-year-old university student living in Suwon, Gyeonggi. “From my understanding, the phone should have been handed over to one of the major mobile carriers, but I found later that the employee sold my phone to a private dealer instead.”

The university student was unsure whether the employee thoroughly deleted sensitive data on the phone.

“I wish there are some systems to help consumers stay informed and regulations to curb unfair sales practices,” said the university student.

The industry is getting more attention from regulators. On Feb. 15, the Korea Communications Commission (KCC) announced that it ordered phone companies to adjust their compensation programs after consumers complained that some benefits could be different from what was they were initially promised.

The KCC found that companies paid only a partial amount of the initially promised subsidy in some cases without giving a sufficient explanation before a customer signed a contract.

The goal was to prevent unfair sales practices such as deliberately withholding crucial information from customers.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]