Samsung to Sell High-end Refurbished Cell Phones

Wouldn't it be great to own a Galaxy S or Galaxy Note 7 with a much lower price tag and environmental impact? According to Reuters, Samsung is planning to launch a program that will refurbish premium smartphones, offering refurbished versions for a lower cost.

Worldwide smartphone sales have been fairly flat recently in Q2 2016 with vendors shipping 343 million smartphone, yet Samsung has gained some market share due to popular products like the Galaxy S7 and Galaxy S7 Edge. "We continue to see a number of changing dynamics in the smartphone market and many vendors are readjusting their business strategy and portfolio to take advantage of these market movements," said Ryan Reith, program vice president with IDC's Worldwide Quarterly Mobile Device Trackers.

For smartphone manufacturers to stay competitive in this market, innovative companies will have to either increase market share or boost profits. By offering refurbished cell phones, Samsung may be able to accomplish both and presumably maintain healthy margins in the process.

Selling the same cell phone twice seems like an ingenious way to increase profitability. Apple sells refurbished iPhones in many markets and the iPhone resells for approximately 69 percent of its original value after one year of use.

Most of the smartphones sold in Samsung's refurbished cell phone program will come from the one-year upgrade program, for people with the interest and means to own the latest devices. Although some of Samsung's recent smartphones have been very popular, they do come at a high price. The Galaxy Note 7 for example starts around $850, making it unattainable to many especially in emerging markets such as India where the average smartphone retails for under $90.Selling refurbished smartphones may be a way for Samsung to stay competitive even with lower-cost manufacturers using its flagship devices.

"Outside of Samsung's Galaxy S7 flagship, a majority of vendors, including Apple, have found success with more affordable models compared to their flagship handsets," said Anthony Scarsella, research manager for Mobile Phones. "As smartphone prices continue to drop and competition escalates at the high-end, vendors will need to continue to push 'flagship-type' devices at affordable price points to encourage upgrading on a more frequent basis." Offering refurbished phones seems like an easy way to achieve this.

Although manufacturers may wish to have shorter replacement cycles to boost sales of new devices with consumers frequently upgrading their smartphones, longer cycles are more sustainable. Manufacturing smartphones accounts for a significant amount of greenhouse gases, although operating them does as well. Smartphones can also avoid the need for other separate devices, such a mp3 players and cameras when users are upgrading from models with fewer features.

Refurbishing smartphones could be relatively inexpensive for Samsung. Refurbished phones will commonly come with a new battery or casing, yet they may open up new markets for its high-end products after one year of use. It might create a dip in sales for Samsung's mid-priced offerings, but it also gives consumers more attractive options overall.

Image credit: Kārlis Dambrāns, Flickr