Can you tell us a bit more about your quarterly trade-ins report and outline some of the key findings?
Each quarter, HYLA Mobile analyses millions of data points to determine trends for mobile device trade-ins in the United States. Combining market data with data from HYLA’s own analytics solution, we’re able to share insights on key trade-in trends, including the most popular devices traded-in, average trade-in values for devices, as well as the age of devices at trade-in. Every quarter we also share information about the total amount of money returned to consumers thanks to trade-in programs, which in Q2, was over $455 million.
Our data from last quarter showed us two things—that consumers continue to hold onto their devices for longer, and as a result they are receiving less value for their devices when they do eventually trade them in. With the average age of a device at trade-in just over three years old (3.01 years), it comes as no surprise that the older the device, the more it depreciates in value. The most optimal time to trade-ina device is between 18-24 months of ownership.
Are there key trends that you typically see in this quarter year on year?
The mobile device market changes rapidly, but there are definitely some key trends that we see every year. Q1 is a busy quarter for trade-ins, following the post-Christmas rush. And Q3 is a big quarter as smartphone release season falls just before the end of the quarter. And, of course, Q4 is the busiest due to the holiday purchases.
This makes Q2 a quiet quarter—there are no ‘big events’ that contribute to driving trade-ins. That being said, in Q2 of this year, the amount returned to consumers had grown 10 per cent from Q2 of 2018—showing the increasing popularity of trade-in programs year on year.
We are excited to see our trade-in trends results for Q3 of this year, following Apple’s recent launch event. There was a lot of hype around the event—and while there were rumors of 5G devices, those in the industry knew that we wouldn’t see 5G iPhones from Apple so soon. Early adopters will want to have these latest and greatest devices, and we are likely to see an increase in upgrades and trade-ins in Q3.
HYLA’s Q2 2019 report shows that consumers are holding onto the devices for longer, with smartphones now on average three years old at the point of trade-in.
What market drivers do you think are causing this, and what should players in the market be doing to encourage upgrades?
This has been a trend for many quarters now. As the price of devices has slowly risen, consumers have chosen to hold onto their devices for longer and longer.
For many, it can be difficult to see a real difference between the higher priced devices that are launching, and the three-year old devices they have in their pockets. The general sense is, “my phone is good enough for now.”
Lack of awareness of trade-in programs is another big reason consumers hold onto their devices for longer. Data shows a direct correlation between trade-in promotions and consumer upgrades.
Consumers are also seemingly holding out for 5G devices. We already know that Apple is not likely to release 5G devices until 2020, and there has been many stories following the launch event encouraging customers to hold onto their devices for another year. But what many consumers don’t know is that 5G isn’t likely to be mainstream for a few more years yet—so they will be waiting a very long time before they can really use their 5G devices.
Ultimately, more education in the market is needed—because the cost of new devices doesn’t have to burn a hole in consumers’ pockets. Our research found that the average trade-in value of an iPhone in Q2 2019 was $163.46, while that of an Android device was $62.25.
But if consumers chose to trade-in their devices earlier, they’d get much more money for their old devices. For example, our data from Q2 showed that the trade-in value for an iPhone 8 Plus, which launched two years ago, was $270—using that value to offset one of the new iPhone 11 devices (albeit the entry device at $699), means a savings of nearly 40 per cent.
For operators, retailers and OEMs, there is so much more they can do with secondary devices if they get them from consumers sooner, rather than later—they have a much stronger second life, whether that is servicing an insurance claim, or a second life in an emerging market. It’s the responsibility of operators, retailers and OEMs to not only educate their customers on trade-in programs, but also themselves recognise the benefits of regular upgrades, and the revenue opportunities of repurposing, and recycling, pre-owned devices.
How will the launch of operator 5G networks and devices impact device upgrades?
According to research from Canalys, 1.9 billion 5G smartphones will ship over the next five years, while the GSMA has cited that 47 per cent of connections in North America by 2025 will be 5G. However, on a global basis, 59 per cent of connections will still be 4G by 2025, which makes the pre-owned 4G devices still desirable around the globe.
With 5G devices already hitting the market, operators, retailers and OEMs will be looking at ways to encourage customers to purchase a new device. But the sophistication of 5G devices has created an even higher price bracket. That being said, from looking at the launch of 5G in countries such as South Korea, where there are already over one million 5G subscribers, it’s clear that people are willing to pay for the upgrade. Operators, retailers and OEMs should be looking to sell as many 5G devices as possible—and this is where trade-ins can play an important role in subsidising the sale of that 5G device.
As consumers make the jump from 4G to 5G, the value of 4G devices during this transitional period becomes pivotal—and not just for the consumer to make 5G affordable, but for operators, retailers and OEMs too to maximise the use of 4G devices, which will still be widely used. Having the right data analytics to set enticing trade-in values while maximising profits in the secondary market will be key.
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How do you expect the secondary device market, and the global smartphone market, will develop, and what can we expect for the rest of this year?
When we see a new generation of wireless technology come to market, there is usually a domino effect on the secondary device industry.
At the start of 2019, the industry saw OEMs such as Apple attribute declines in revenue and smartphone sales to heating tensions with China, as well as to the broader economic slowdown. Samsung also forecasted a drop-in profit due to declining mobile sales in China and because of “intensified competition”.
But despite the global smartphone market declining, the secondary device market continues to grow—even if it is small growth. According to Counterpoint Research, the secondary market grew just 1 per cent in 2018, compared to around 13 per cent the year before.
While the smartphone market has been challenged, later on this year, some good news is expected—according to analyst firm IDC, the market is set to pick up momentum, with year-on-year growth of 2.3 per cent expected in the second half of the year.
There is huge potential for the secondary device market this year. With more 5G devices becoming available, operators have an opportunity to use this transition to encourage trade-ins—especially when there is still so much potential for 4G devices.
These 4G devices will be incredibly important in emerging markets—with regions like India mostly using feature phones on 2G networks, being able to spread faster connectivity and newer 4G devices to new areas is incredibly important. Reusing and recycling devices responsibly is incredibly important, too. As more mature markets upgrade to 5G, it’s important that we re-use the deluge of 4G devices to bring connectivity to more people—in a way that is less harmful to the planet.
Biju Nair, President of HYLA Mobile