With any business venture, the size of any potential profit margin you can make is a crucial consideration. Sometimes, even the most attractive-looking markets, where sales volumes and revenues appear to be high, can fall down on the profit margin test.
There are numerous reasons given for why, over the past few years, demand for used mobile phones has started to eat into the growth of the new device market. The fact that used mobile phones are so much cheaper, while new handset RRPs have continued to soar, has pushed more and more consumers to look to used mobile phones for better value. That in turn has encouraged more retailers to enter what is by any measure a burgeoning market.
But an equally important part of the jigsaw is the fact that selling used mobile phones tends to deliver a better profit margin than new. Due to high RRPs and tight control of the wholesale and retail markets by big name manufacturers, vendors are lucky to get margins of above 3-5% on sales of new mobile phones. But as this article on the refurbished phone market in India explains, the greater freedom and low wholesale prices of used phones mean retailers can easily make margins of 10% or more, despite used phone retail prices being 65-75% lower than new.
Right phone, right margin
In truth it is slightly misleading to put a ballpark figure on margins across the entire used phone trade, because there are so many factors affecting it. If we put aside a business’s operating costs and concentrate on the devices themselves, the amount of money you can make from buying and selling a used mobile phone will still vary considerably according to things like brand, model, specifications, the colour of the case and what accessories you ship with it.
As a rule of thumb, used phone vendors are able to make a better margin on higher value, higher spec handsets. Just to give a very simple example, say you buy a mid-range handset in average condition for £50 and you are able to sell it for £100. The 100% mark-up sounds very attractive. But if you’ve had to spend £25 on refurbishing it, plus another £10 on marketing and operating costs. Your gross profit is actually only £15, a margin of 15%.
Compare that to a much higher-spec used phone in better condition that you buy for £350 but sell for £450. The mark-up is lower this time, 66%. But the counterbalance to that is you only spend £10 on marketing and operating costs per device sold. So, your gross profit is £90 – a much better margin of 26%.
Selling used mobile phones
The trade team at Phoenix Cellular share decades of experience in the used phone market and are well versed to advise you on competitive resale prices when buying devices from us. We stock all devices from grade A pristine to C, on both the standard and marginal VAT scheme. Contact us today for more information and our latest stock list.