The market for refurbished gadgets has been surging worldwide as consumers seek more affordable alternatives amidst rising costs of living. Globally, a significant segment of the market remains unorganized. In India, for instance, organized sellers accounted for only 8% of the total market in 2021. By establishing themselves as credible platforms, startups are looking to leverage opportunities within this niche and growing industry.
In recent years, investors, too, have recognized the value proposition of these refurbished gadget-focused companies. Back Market, a French online marketplace, has raised $1.02 billion in equity funding. Earlier in November, Refurbed, a Vienna-based company, raised a $57 million Series C round. San Diego-based smartphone recycler ecoATM raised $50 million. According to Crunchbase, just this year, eight of these budding startups have raised multimillion-dollar rounds.
The global market for refurbished electronic gadgets is projected to reach $94.1 billion by 2030 from $48.3 billion in 2023, growing at a 10% CAGR, per Coherent Market Insights. Refurbished smartphone sales experienced a 5% year-on-year growth as of FY2023, with India leading the market with 19% growth, according to Counterpoint Research. We believe this emerging market will sustain this trajectory and evolve as a key avenue for investment and entrepreneurial opportunities for several reasons.
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Surging Demand for Affordable Alternatives
With the rising cost of living outpacing growth in income, consumers are constantly on the lookout for affordable alternatives. Entry-level smartphones today cost 20% more than they did five years ago in India, as reported by the Financial Express. The recent shift towards consumerism and the desire to acquire the best and latest devices has created a gap in the market.
In such a climate, refurbishing startups seems to be the required solution to fulfill the aspirational demands of the consumers. Back Market, for instance, claims that its warrantied devices cost up to 70% less than brand-new ones. A majority of its products are models launched a few years ago that brands no longer actively market. The company has seen growth in its customer base from 1.5 million in 2019 to 8 million in 2023. Refurbed states that its products are up to 40% cheaper than new devices.
Shift to Sustainable Solutions
E-waste has evolved to become a serious concern for the climate and has been exacerbated by the constant production of and the consumerist mindset to purchase the latest models. The UN Global E-waste Monitor reported that e-waste had surged 21% between 2014 and 2019, making it the world’s fastest-growing waste stream, and it is projected to double by 2030. Additionally, a substantial portion of a smartphone’s environmental impact comes from its manufacturing process. An iPhone 13, for instance, has 69kg of CO2 emissions throughout its life cycle, of which 81% would be related to production.
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This is where companies focused on refurbishing have an extraordinary opportunity to step in and create a significant impact. Investing in refurbished products positively impacts the environment by boosting the circular economy, avoiding additional e-waste, and reducing CO2 emissions and fuel consumption. Back Market recently announced that it was able to save almost 1 million tons of CO2 emissions from being emitted by redirecting customers away from purchasing a new device. The company also recognizes the shift in consumer priorities. In 2020, just 5% of its US customer base cited environmental impact as their reason for purchase, which increased to 20% in 2023. Swappie, an iPhone refurbishing platform, in its environmental impact statement, is reported to have offset 23,550 tons of CO2 emissions.
Quality Guarantees from Refurbishing Platforms
Historically, the reselling market has been looked at with skepticism due to a lack of quality assurance. A Deloitte study highlighted that a lack of trust in refurbished phone sellers deviated 25% of its respondents from purchasing. Credible startups alleviate this concern and bridge the gap between affordability and consumers’ appetite for high-end devices. Back Market products, for example, come with a 30-day return policy and a one-year warranty, which covers all software and hardware defects. Devices sold by Refurbed, as well, come with at least a twelve-month warranty and a 14-day return policy.
As they look to scale, startups are facing a competitive landscape. Apple and Amazon both have refurbishing operations. Apple-certified refurbished products assure warranty, fully functional testing, and savings of up to 15%. In an agreement in 2019, Apple gave Amazon discounts of up to 10% on all its products in exchange for Amazon retaining seven of the six hundred resellers that were active on the platform. In 2022, Apple smartphones captured 49% of the refurbished market, making this deal of notable value and an enormous threat to new entrants in the market. Consequently, the two companies are now tied up in an anti-trust lawsuit that claims that the collaboration has driven up product prices and removed nearly all resellers on Amazon, a centralized marketplace for upcoming participants. The future of these business models, in light of the ongoing case, seems bleak.
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Despite competition from big tech verticals, the refurbished gadgets market is an emerging opportunity for startups to step in. Surging demands for affordable alternatives and increasing consumer awareness to steer toward sustainable choices combined with growing investor interests have made this niche and unorganized industry a lucrative market for entrepreneurs to leverage.
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