Mobile phone retail has changed considerably over the years. Not so long ago, network operators sat as the kingpins of the whole ecosystem. As the gatekeepers of connectivity, they could also dictate who sold the handsets and how – there is no point buying a phone if you can’t use it on a network.
So it was that operators were able to sign deals with handset manufacturers to supply devices on their behalf, bundled in with long-term network contracts. Yes, there were pre-paid SIMs and low-cost devices available, but at the premium end of the market, operators held a key stake in top-end device retail. Even the high street mobile retailers were effectively acting as agents selling operators’ contract-plus-device deals. In many cases, the operators eventually cut out the middle man and started opening retail stores themselves.
Things started to change when the contract-free market started to evolve from being more or less exclusively for budget devices to making inroads on the premium end of mobile retail. Two things happened to push this shift. One, with the arrival of smartphones, device manufacturers like Apple and Samsung realised that network access was no longer the most valuable asset in mobile – it was the smartphones themselves. That made them less inclined to hand over control of device retail to the operators, wanting to retain the value for themselves.
Secondly, consumers started to lose patience with being tied into two-year phone contracts. Yes, it meant you could buy the latest models and spread the costs over 24 months. But it also meant you had little flexibility about when you chose to change your phone. Many people also started to realise that the contract packages offered by operators did not always offer great value, even with the subsidised device.
The SIM-only effect
Some virtual operators – small, niche players that buy network access wholesale from operators to sell their own mobile voice and data plans – saw an opportunity and switched from selling pre-paid SIMs to SIM-only contracts – shorter term, lower cost, more flexible deals where you get no device thrown in, just a SIM card. The SIM-only model proved hugely popular, it tied in with the likes of Apple and Samsung stepping up their direct retail efforts, and soon the network operators themselves were jumping on board.
By 2017, SIM-only had overtaken bundled device deals as the most popular type of mobile deal in the UK, accounting for a third of the market.
This separation of the SIM/network access market and the device market has posed a major challenge to network operators. With the competitive advantage of bundled deals gone, they have to compete with other smartphone retailers on equal terms. They have therefore lost market share and, with smartphone retail being so competitive, they have lost margin too.
What Should The Network Operators Do?
Network operators should seriously consider selling used smartphones to complement their SIM-only deals. Such is the iron grip that the likes of Apple, Samsung and Huawei keep on the retail prices of their devices these days, it is very hard to increase margins through selling new smartphones – in short, the manufacturers want to be able to offer the best deals directly. With second-hand refurbished devices, however, there are no such controls – you can buy high quality handsets extremely cheap and easily make a high profit on them while still offering a good deal to consumers.
Pre-owned smartphones also tie in with a key reason why so many people are switching to SIM only – they offer better value. With used and reconditioned versions of the major manufacturers’ last-but-one releases retailing less than half the price of the latest models, more and more consumers are seeing the value in going for a used handset. The performance and feature benefits of the newest models are certainly not that much greater than their predecessors.
Finally, this all adds up to the used mobile phone market being a very high growth market. While new smartphone sales have flatlined and even dipped slightly over the past couple of years, the used smartphone market has gone in the other direction. Not only do pre-owned phones offer a way for operators to claw back margin on device sales. It is also tapping into a growing consumer trend.
Speak To Phoenix Cellular
Stocking tens of thousands of used mobile phones at any one point, tested and graded, ready for next day delivery to anywhere in Europe, Phoenix Cellular are the go to supplier for used mobile phones. Our trade sales team boast decades of experience in the industry and offer help and support to all our customers.
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