As secondhand mobile phone sales surge, here's how buyers can protect themselves from scams

The second-hand device market has been on a tear over the past few years as a growing number of consumers opt for pre-owned mobile phones over brand new. Posting nearly 10 percent  growth in 2020, the market is expected to grow an average of nearly 12 percent  more over the next 2 years, reaching $65 billion by 2024.

Amid this steady uptick, it’s no surprise that purveyors of used devices are also growing fast to meet demand. Most notably, one of the largest used device marketplaces, French-based Back Market, just landed a $510 million Series E investment, launching the company to a $5.7 billion valuation. And Back Market is far from the only game in town. Amazon and eBay are also big players in the $17 billion used device market, in addition to mobile carriers and the device makes themselves, like Apple and Samsung.

So, what’s driving the surge in secondhand sales? Primarily, it’s the cost-benefit of new devices. As device technology has evolved, we’ve seen smaller and fewer leaps in innovation from one device generation to the next. That, coupled with the economic impact and job losses of the pandemic, has many buyers opting to spend $500 on a quality, late-model refurbished device instead of $1,000 on the newest model. The incremental benefits of buying new don’t justify the cost.

Sustainability also plays a role. Even with a booming resale market, hundreds of millions of cell phones  end up in landfills each year and have become the fastest growing form of electronic trash. Given the ongoing chip shortage impacting production of new devices, the scarcity of rare earth minerals required for manufacturing and the human rights issues around sourcing of those raw materials, many consumers opt for recycled devices as a more sustainable alternative.

Buyer Beware: Used Phone Risks

While the demand for used devices has greatly outweighed the supply for at least the last decade, the resale market itself has also been plagued by notoriously high risk for the buyer. In short: it can be difficult to know what you’re really getting.

As many as 1 in 5 mobile phones sold across borders is fake, leaving unsuspecting consumers spending almost $48 billion on counterfeit devices. Not only are they a waste of money, but imposter devices can also be dangerous, prone to overheating, catching fire or electrical shocks, and many contain digital spyware that steals the buyer’s identity or hacks their accounts.

If the device itself is legit, resale devices can still be lost, stolen, blacklisted or not paid for in full. That means they’re locked or "bricked," and therefore rendered useless to the buyer.

Even if the device is authentic and accessible, that doesn’t mean it’s fully functional. There’s no way to tell by looking at it if the battery health is good or whether the device has been repaired with aftermarket parts.

How to Protect Your Investment

So, how can buyers protect themselves from low-quality secondhand devices?

1. Choose carefully. Some devices lend themselves better to refurbishment and offer more advanced features with a longer "shelf life" before they’ll feel obsolete or outdated. These offer the best bang for the buck and better ROI.
2. Ask the right questions. Did the seller conduct any tests on the device through diagnostic providers before offering it for sale? What level of inspection do these tests offer? Is the device certified and backed by a guarantee? Is there a warranty? What’s the return policy?
3. Purchase a device history report. If the seller doesn’t offer a complete device history report before the sale and instead offers a base level diagnostic test, run your own complete device history report. Using just the device IMEI number, a thorough device history report lists any repair history (including non-OEM parts), checks whether the device has been lost or stolen, if it’s locked to a previous user, which carrier(s) the phone can be used with and if the device is under lease with a provider. Available for about the price of a premium cup of coffee, it’s well worth the cost to protect your investment.
4. Look for a certified device and seller. The most reputable sellers and resell platforms run diagnostics and certify every phone they sell. Much like the Carfax vehicle history report and certification, this third-party mobile device certification and history report ensures that what you see is what you get, providing peace of mind for the buyer.

With all the risks inherent in secondhand sales, it’s easy to see how, historically, trust has been the #1 thing missing from the device resale market. And in order for the market to thrive, it’s the #1 thing device sellers and resale marketplaces must address.

To do so, re-commerce platforms must keep failure rates low and device quality high to build buyer confidence. The easiest way to do that is by offering device diagnostic testing and certification through a reputable, industry-recognized, third-party provider.

In addition to ensuring reliability for the buyer, this objective device certification benefits the seller, as well. It not only reinforces trust in the secondhand market and bolsters sellers’ brand reputation, but it also increases the resale value of devices by 5 to 10 percent , which enhances seller profitability. These increased prices don’t deter buyers, in fact they’re more likely to pay a premium for a device they can trust. With returns on secondhand devices averaging anywhere from 20-30 percent  of sales, it can also help lower operating costs. Companies that certify their devices with third-party services can see returns plummet to as low as 3-5 percent -- a huge reduction that saves money and time and drives loyalty and referrals.

By bringing trust and transparency to secondhand device sales, we can expect to see the market continue to flourish with increasing demand in both the U.S. and internationally, offering more affordable options to consumers and creating opportunities for continued investment.

Photo credit: Rachata Teyparsit / Shutterstock

Chris Sabeti is the founder and CEO of Phonecheck. Chris founded Phonecheck in 2015 to build trust between buyers and sellers of used mobile phones. With its 80-point certification, ADISA-certified data wipe process and complete Device History Report for iOS and Android phones, Phonecheck is trusted by leading global marketplaces and enterprise used device processors like eBay, BackMarket, Foxconn and Brightstar to certify used devices at scale. To learn more, visit www.phonecheck.com.