Apple’s second-user smartphone business is booming

According to research firm IDC, the refurbished smartphone market is booming, with sales expected to reach 413 million units by 2026.

$99 billion red balloons

That’s a $99 billion market, so how can Apple take a chunk out of it? (iPhones account for around 82% of the second hand device market, according to CCS Insights and hold value for longer even in that market.)

Apple already does so, to an extent.

The company’s refurbished store is a great place to visit if you’re in the market for a new Apple device. While it is more expensive than other refurbished sales outlets, what you get in exchange is Apple-tested/repaired hardware, a manufacturer’s guarantee, and original packaging.

Much of the time, other outlets offer no guarantee, may replace cables or chargers (if provided) with non-Apple products, and the packaging can be a chunk of bubble wrap.

With Apple refurbs you pay more, but get more. Though do bear in mind that the company doesn’t want to dramatically undercut its own prices, and nor does it want to dent values in the second user markets.

Towards the circularity

At the same time, Apple does want to exploit any opportunity generated by its “Reuse and Recycle” trade-in scheme.

That means recycling products that are too old to resurrect and resell — and selling those that still have value. IDC believes the boom in refurbished smartphone sales is driven by trade-in programs of this kind. But there’s another motivation.


What is sustainability in smartphones? Apple’s environmental focus makes it clear: It means using more recycled components; reducing the environmental consequences of ownership; lowering energy costs; and creating resilient devices that don’t usually fall apart after 12 months.

In 2018, Apple Vice President for Environment, Policy and Social Initiatives Lisa Jackson was explicit about this when she said: “Because they last longer, you can keep using them. And keeping using them is the best thing for the planet.”

Doing good at a profit

It’s interesting how Apple really doubled down on services and accessories at about that time, accepting that if its customers purchased devices less often, it would need to maximise the ARPU by offering a feast of profitable add-ons across the life of those devices. Services contributed $20 billion in Apple’s last quarter — more than Mac and iPad sales combined. Services and accessories account for almost a third of Apple’s revenues now, and all of this data connects together well.

But what comes next? Are annual product upgrades still environmentally and socially responsible? How can Apple finesse its business even more to make the most of what it already has and maintain the success it’s already seen? And how can it transform the growing second user market already dominated by iPhones into a regular revenue contributor to its own bottom line?

The upgrade opportunity

CCS Insight thinks Apple is quietly attempting to expand its reach. The analysts note that a growing range of iPhone models are being made available at the company’s refurb store across multiple nations.

Though stocks are low, they note: “By reaching for a larger piece of the second-hand market, the company looks set to bring even more first-time iPhone buyers into its ecosystem who may not be able to afford a brand-new device.”

Of course, once it has someone hooked into its ecosystem, the company has other hardware products, accessories, and services to enhance the customer experience. People with iPhones love Apple Music and like to use AirPods, as Apple’s existing customer base of 935 million paid subscribers shows.

No matter by which route a user enters Apple’s world, it has some way to generate revenue from that journey — and most customers really do feel they get what they pay for, most of the time. That customer satisfaction is its own network effect and is driving Apple into every sector, including enterprise IT.

It also means demand for second-user iPhones is growing.

Supply, demand, opportunity

CCS Insight tells us that while the US has a surplus of traded-in formerly leased phones, trade-in volumes in Europe don’t meet second user demand.

In 2021, Western Europe had to import 11 million smartphones to meet demand from the second-user market, they say. In most territories, demand for these devices is growing to outpace supply.

With its existing set of trade-in schemes, including the iPhone Upgrade Program, Apple is in a strong position to meet growing demand, analyst Ben Wood argues. And it could take this further still:

“Apple is well-positioned to take greater control of the flow of secondary devices if it chose to,” Wood said. “If it really wants to make in-roads in the market, it could even offer iPhones through a subscription service to guarantee a more predictable stream of returning devices.”

This speculation isn’t new, of course. But at what point will a move to offer iPhone-as-a-service to Apple’s vast consumer market become a slam dunk that both guarantees Apple’s revenue in a challenging market while also nurturing an army of billions of happy consumers ready to pick up a new device every few years (or subscribe to an older one for a lower cost) while investing in the company’s rich smorgasbord of services?

Doing so actually helps Apple build that circular manufacturing economy it wants to put in place, making such a move good for business, and good for the planet.

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Copyright © 2023 IDG Communications, Inc.


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