Samsung Electronics Co Ltd plans to launch a program to sell
refurbished used versions of its premium smartphones as early as next
year, a person with direct knowledge of the matter told Reuters.
The South Korean technology firm is looking for ways to sustain earnings
momentum after reviving its mobile profits by restructuring its product
line-up. As growth in the global smartphone market hits a plateau,
Samsung wants to maximize its cost efficiency and keep operating margins
above 10 percent.
The world’s top smartphone maker will refurbish high-end phones returned
to the company by users who signed up for one-year upgrade programs in
markets such as South Korea and the United States.
Samsung would then re-sell these phones at a lower price, the person
said, declining to be identified as the plan was not yet public.
The person declined to say how big a discount the refurbished phones
would be sold at, which markets the phones would be sold in or how many
refurbished devices Samsung could sell.
A Samsung spokeswoman said the company does not comment on speculation.
It was not clear to what extent the phones would be altered, but
refurbished phones typically are fitted with parts such as a new casing
or battery.
Rival Apple Inc’s iPhone has a re-sale value of around 69 percent of its
original price after about one year from launch, while Samsung’s
flagship Galaxy sells for 51 percent of the original price in the U.S.
market, according to BNP Paribas.
Refurbished phones could help vendors such as Samsung boost their
presence in emerging markets such as India, where high-end devices
costing $800 or so are beyond most buyers.
Apple sells refurbished iPhones in a number of markets including the
United States, but does not disclose sales figures. It is trying to sell
such iPhones in India, where the average smartphone sells for less than
$90.
Selling used phones could help Samsung fend off lower-cost Chinese
rivals that have been eating into its market share, and free up some
capital to invest elsewhere or boost marketing expenditure.
Deloitte says the used smartphone market will be worth more than $17
billion this year, with 120 million devices sold or traded in to
manufacturers or carriers – around 8 percent of total smartphone sales.
Some market experts expect the used market to grow fast as there are
fewer technology breakthroughs.
“Some consumers may prefer to buy refurbished, used premium models in
lieu of new budget B.rands, possibly cannibalizing sales of new devices
from those budget manufacturers,” Deloitte said in a report.
Samsung’s refurbishment program, details of which the person said could
be finalized as early as 2017, could help the firm generate revenue from
dated high-end smartphones returned by users upgrading to newer
versions.
The company’s latest premium phones, the Galaxy S7 and Galaxy Note 7,
have received favorable reviews, suggesting cheaper, refurbished
versions could be popular. At U.S. carrier Verizon Communications, the
Galaxy S7 edge with 32-gigabyte storage retails for $792 without
subsidies, while the Note 7 costs $864.
The program could help Samsung defend market share in emerging countries
by bolstering mid-tier sales. Refurbished phones could also appeal to
enterprise clients who want certain security or software products
pre-installed on phones to give to their employees, the source said.
The risk of offering refurbished devices is that they could potentially cannibalize sales of Samsung’s other mid-tier devices.
Expectations for solid smartphone sales helped Samsung shares to a
record 1.675 million won each on Friday, taking two-day gains to 7
percent and adding $15 billion in market value. The shares traded down
0.36 percent in Seoul on Monday.
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