New life for old phones is good business for service providers
The big idea: The shortening life cycles for electronics has led to a growing stream of well-functioning used products. Many companies are considering refurbishing them to like-new condition, then including them in their product lines. This has the potential to be a truly sustainable business opportunity with positive economic and environmental implications.
The scenario: Last September, Apple unveiled its much-anticipated iPhone 6 and 6 Plus, the eighth generation of the iPhone. On the first day that pre-orders were available, Apple and its carrier partners such as AT&T and Verizon received orders of more than 4 million, the highestever volume in a single day.
For such service providers, this meant that in addition to beefing up their product offerings with the new iPhone 6, they could also collect previous-generation iPhones to refurbish and sell. The cost to do so is a fraction of the cost of new devices.
Their challenge was how (and whether) to incorporate the refurbished high-end products into their product lines. On the one hand, these discounted used devices would give them the opportunity to upsell customers higher-end services that other low priced phones wouldn’t support. Since providers such as Verizon rely on services to make profits, they could potentially increase their earnings. On the other hand, the introduction of refurbished phones could cannibalize sales of new ones.
The resolution: A close look at the economic and environmental impacts of remanufacturing reveals that including refurbished products can actually increase new-product sales. This is because a product is effectively sold twice: first as new, then as used. The cycle creates an incentive to lower prices and increase sales of phones that support higher-margin, data-rich service plans, which deliver higher profits.
Since remanufacturing may lead to growth in new products’ sales, the total environmental footprint could actually worsen. However, because refurbished products are not subject to the manufacturing process of new products, the per-unit environmental impact is much lower.
The lesson: Incorporating refurbished products into a company’s product line leads to profitable and more sustainable growth. Making it work requires a comprehensive understanding of their impact on demand, profits and the environment. But the business opportunity is there: Millions of fully functional electronic devices are being replaced, so why not expand the market and entice price-sensitive customers to upgrade by selling these used devices — rather than have them pile up in customers’ desk drawers?