Fraudsters pose challenge to UAE's refurbished phones market.
It is a scene replicated across dozens of stores that dot
the narrow arterial lanes of the Deira Central Business district, a reflection
of the booming business in refurbished smartphones amid growing demand from
While several retailers in Dubai have traditionally offered
trade-in services to customers upgrading to higher-end phones, sales for
pre-owned smartphones are witnessing unprecedented levels, as traders outdo one
another to appeal to evolving customer tastes. Hundreds of thousands of pre-owned
smartphones, in various models, are being imported from the US and Europe.
The worldwide market for refurbished smartphones is set to
grow to 120m units by 2017, with an equivalent wholesale revenue of around
$14bn, according to research firm, Gartner. This is up from 56m units in 2014,
with an equivalent wholesale revenue of $7bn.
Linker General Trading imports between 4,000 and 5,000
refurbished smartphones weekly, and most of this stock often runs out in the
first two days of delivery, owing to high demand.
"Nearly every month a new smartphone hits the market,
prompting customers to trade in their older devices, often still in pristine
condition," says Issa Asghar, managing director at Linker General Trading. "The
used devices have a high demand among price-conscious consumers who would want
to pay less for a premium brand such as iPhone, Samsung, LG or HTC."
His company imports refurbished versions of recent phone
models manufactured by Samsung, LG, iPhone, Motorola, Blackberry and HTC. Some
of these devices are sold at less than 50% of their original prices.
For example, a refurbished Samsung Galaxy S4 goes for AED430
compared to its launch price of AED2,599 two years ago. An LG G3 goes for
AED800 compared to its last year's inaugural price tag of AED2,499, while a
Samsung Galaxy Note 4 can go as low as AED1,100, down from its original price
of AED2,799 last year.
"We work with various suppliers in USA and Europe who
collect phones that suit the tastes of our growing number of customers. Some of
them do not come in their original packaging, but they are all tested for
defects and most of them are scratch and dent free," says Asghar, whose
customers include resellers from other Gulf Countries and Africa.
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Gamez General Trading, another Dubai-based dealer of
refurbished phones from USA and Hong Kong, imports over 2,000 units weekly. The
company sells to local retailers and individuals, who often have to pre-book
orders based on the models and quantities required.
"We are well positioned to supply any quantity within the
line of brands that we deal in," says Hassan Ayoub, sales manager at Gamez.
"All our imported smartphones are fully unlocked and ready to work on any
mobile network around the world."
A recent survey of US and German consumers by Gartner found
that 60% of respondents replace their smartphones because they want the latest
features or simply because they "just want" a new phone.
US companies such as ERecyclingCorps and Brightstar buy used
phones and spend around $50 to polish up scratches and wipe all data, and then
resell them at a profit to distributors around the world, but mostly in Asia,
Middle East and Africa.
US carriers such as Verizon and AT&T both have refurb
programmes, and so do online retailers such as Amazon, eBay, and Overstock.
Some pre-owned smartphones do not need to be refurbished if found to be in
UAE retailers such as Axiom and Sharaf DG have, over the
years, offered smartphone trade-in services, while online shopping sites such
as Souq.com and Dubizzle.com are famous for their second-hand smartphone
bargains. But despite the availability of these services, they often fall short
of providing potential buyers with a wider selection from a single source and
in desired quantities.
Analysts believe however, that the new-found love for
refurbished phones may halt global sales of smartphones that have grown to
337.2m units in the second quarter of 2015 from 302.1m units in the same period
last year, representing an 11.6% increase, according to a Gartner report
released earlier this year.
"Stakeholders that are already participating in
take-back or trade-in programmes need to have a strategy for turning used
devices into a positive asset," said Meike Escherich, principal research
analyst at Gartner EMEA. "Others - particularly high-end phone original
equipment manufacturers [OEMs] - need to take a closer look at this market in order
to evaluate the impact these second-hand devices will have on their market
positions and revenue streams."
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This trend is also likely to negatively impact companies
that focus on mid-range devices, such as InnJoo and Xiaomi. Instead of
purchasing a phone that offers a good value, an older premium device for the
same price may seem more attractive.
Probably the biggest threat facing the smartphone
refurbishing business is dishonest retailers selling refurbished phones by
passing them off as brand new. Because of the deception, growing numbers of
consumers are opting for these "new" phones, which have an additional AED40 to
AED50 overhead associated with packaging. However, while carrying a higher cost
to the consumer, the devices are still considerably cheaper than mainstream
retail prices and yield higher margins for the seller.
The industry is further threatened by cheap "knock-offs"
from China that are sold as refurbished phones or packaged to appear genuine to
unsuspecting customers due to their near similarity. These are sold in the UAE
and also exported to neighbouring countries.
Dubai Police alone has, since last year, seized fake mobile
phones worth over AED100m in a bid to protect vulnerable customers. But many
more still find their way into the country, smuggled in the form of bulk
components that get assembled at various home-based assembly lines in Deira and
Premium feature-packed refurbished smartphones continue to
hit the shelves at considerably lower prices, as newer models hit the market.
And as the industry takes shape, candid sellers will hope consumers become more
adept at discerning them from those passing off second-hand merchandise as new.
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