Report: The refurbished smartphone market is booming

One major factor that’s driven the explosive growth of the global smartphone market is its short, roughly two-year upgrade cycle. But now that that even three and four-year old smartphones are powerful enough for most people’s daily use, there’s about to be an big jump in sales of secondhand and refurbished smartphones, according to a new report from Gartner.

Gartner expects the worldwide market for refurbished smartphones to hit 120 million units by 2017, for a projected $14 billion in wholesale revenue. That will be up from 56 million refurbished phones shipped in 2014. Often, refurbished devices are “good as new” for the consumer. Although they might not come in original packaging, they usually have been tested for defects and arrive scratch- and dent-free, sometimes with a new battery.

Obviously, anyone who purchases a secondhand smartphone is significantly less likely to purchase a new smartphone, which could affect the revenue not only of smartphone makers like [company]Apple[/company] and Samsung, but also the demand for parts in the supply chain. It could also affect companies that focus on mid-range devices, like Xiaomi. Instead of purchasing a phone that’s a “good value,” an older premium device for the same price could be very attractive.

Gartner points out there’s an opportunity for United States companies to send old devices overseas — or, into the “worldwide market.” The iPhone 4S might be seen as an older, unattractive device in rich markets, but given Apple’s premium brand recognition, refurbished units could be more desirable than a similarly priced new phone in developing markets.

Manufacturers also use refurbished units as warranty trade-ins. When you get a new iPhone from an Apple Store because your old one wasn’t working, it’s probably a refurb unit.

Where are these secondhand devices coming from? Gartner surveyed consumers in the United States and Germany — two mature and rich smartphone markets — and found that nearly 64 percent of devices found a second life, usually through private sales and trade-in programs, like the ones your carrier offers when you upgrade your device. Twenty-three percent of devices were handed down to a friend or family member. According to the survey, only 15 percent of devices languished unused, and only seven percent were officially recycled.

Of all the American carriers, Sprint might be in the best position to take advantage of the global market for refurbished smartphones. Its CEO, Marcelo Claure, cut his teeth at Brightstar, which does a lot of smartphone refurbishing business. Plus, its new leasing programs mean that in about two years, the company is going to have a lot of used iPads, iPhones, and other high-end devices on hand. Many of those devices could stay in the United States, because Sprint’s roster of smaller prepaid operators need phones that work on Sprint’s CDMA network.


Secondhand ebook outfit Tom Kabinet races to purge illegal wares

The Dutch secondhand ebook marketplace Tom Kabinet has been ordered by a court to shut up shop this week, and is currently scrambling to get rid of possibly illegal stock so it can keep going.

As you may recall, Tom Kabinet started up in June 2014, predictably causing consternation in the country’s publishing industry — this is not how things currently work with digital goods, as terms tend to say people are buying only licenses to consume ebooks or audio files or what have you.

In July, a court refused to give the publishers an interim injunction against Tom Kabinet. However, on Tuesday the Amsterdam Court of Appeal produced a mixed ruling that said the site had to close down within three days or pay a daily fine of €1,000 ($1,160) – but also that Tom Kabinet’s business model appeared to be legal in principle.

Tom Kabinet’s justification for existing is the tantalising UsedSoft v Oracle ruling of 2012, in which the Court of Justice of the European Union (the EU’s highest court) ruled that customers who had bought a license for downloadable software could sell it on, just as if they had a boxed copy, no matter what the terms and conditions say.

The few European local courts that have subsequently tackled the issue have struggled with the implications of the ruling, particularly its reach. A court in Germany ruled in 2013 that it doesn’t cover ebooks and audiobooks. So far the Amsterdam courts have tentatively disagreed, saying that it’s certainly not clear that the CJEU ruling doesn’t apply to ebooks, and arguing that the CJEU may have to clarify its position in some future referral.

However, the appeal court did agree with the publishers this week about the fact that Tom Kabinet didn’t have sufficient barriers to people “reselling” illegally downloaded books through its platform. That’s why it told Tom Kabinet to shut down – much to the delight of the publishers — at least until it can shape up.

Therefore, Tom Kabinet co-founder Marc Jellema told me on Wednesday that the site is currently cleansing itself of all ebooks that it cannot prove are 100 percent legal. Tom Kabinet already watermarked the books it sells (which are all in the DRM-free ePub format) so that no-one can try selling the same thing twice through the platform, but now it’s going to have to ask sellers for paperwork.

“Technically there is no watertight way to differentiate between a legal and an illegal ebook,” Jellema said. “In order to guarantee only legally owned ebooks are on Tom Kabinet, we have to revert to ask a proof of purchase from our users. We are currently working to get that in place asap.”

This will probably have a significant impact on Tom Kabinet’s stock, though how much is yet to be ascertained. According to Jellema, so far Tom Kabinet has managed to convert more than 6 percent of its traffic to account sign-up and revenue, and its collection covers over two thirds of the Dutch Top 100.

“After the court ruling, that number is bound to change to a lower percentage,” he said. “We are now actively working on plans to get the number of relevant titles back on a respectable percentage.”