The back of an iPhone proclaims that it’s been Designed by Apple in the U.S.and Assembled in China. But a better reflection of sales trends would have them add that they’re also Refurbished in a factory in the United States or elsewhere.
More and more people are buying cheaper, secondhand iPhones and Android phones as newer models get more expensive, with the iPhone X starting at $1,000.
Apple’s iPhone sales have plateaued in the last couple of years, but sales of refurbished phones grew at an annual rate of 13% in 2017, according to Counterpoint’s Refurbished Smartphone trend report. That figure may be closer to 22%, says Serge Verdoux, who’s coordinating the U.S. expansion of Back Market, a website that aggregates sales of refurbished electronics, which derives most of its sales from secondhand smartphones.
A brand new iPhone 6S with 32 GB of space costs $449 on Apple’s website, but a refurbished version of the same model, with double the space, costs $221 on Back Market and comes with a six-month warranty.
Back Market uses machine-learning techniques to match buyers and sellers before taking a 10% cut of sales. Without touching a single item of stock, it has booked $120 million in gross annual sales for 2017 to bring in $20 million in revenue. It’s forecasting 2018 revenues of $30 million in 2018 on gross sales of $300 million. Verdoux claims the site is on course to make $1 billion in gross sales “in a few years” and has “thousands of customers every month.”
After launching in Europe in 2014, France-based Back Market launched to U.S. customers in April 2018 and has found an even more enthusiastic audience for refurbished phones there: Sales are growing ten times faster among Americans after six months of business than they did at the same juncture in Europe.
For its U.S. customers, Back Market sells stock from around 20 refurbished electronics dealers including BrightStar, Gazelle, and PCS Wireless. The latter was founded by Forbes 30-Under-30 alum Ben Nash, who increased sales at the company to more than $200 million over the course of seven years. There are 350 refurbishment sellers on the site overall.
In June, Back Market raised $48 million from venture capital investors in a round led by Groupe Arnault, the French luxury goods firm controlled by billionaire Bernard Arnault, which is also a majority stakeholder in LVMH and Christian Dior. Though Arnault is normally associated with designer handbags and clothing, its investors say they also keep a keen eye on marketplaces, including those populated by secondhand goods.
One reason the refurbished-phones market is growing is that for many in the mobile industry, “the profit margin on a used device exceeds that of a new device,” according to Peter Richardson, a research director at Counterpoint Research.
Back Market’s website is powered by machine-learning tools that analyze products on its site for 15 different quality indicators, forecast demand for its merchants and recommend products to customers.
The startup’s proprietary “buybox algorithm” analyzes a range of product features to determine quality to boost the rankings of certain sellers. The company uses a combination of non-supervised, semi-supervised or supervised machine-learning techniques, using open-source and freely available Python libraries like Google’s Tensorflow.
Verdoux says such techniques are integral to Back Market’s secret sauce. “When a customer comes to Back Market and wants to buy a particular product, we only show them one product, which is the best one.”
Written by Parmy Olsen - Forbes