Second hand mobile phone business: there is no end to "hilly battlefield"

On the eve of 5G, although there are few new tricks that mobile phone manufacturers can come up with, this has not slowed down the speed of introducing new smartphones. New product launches were held one after another. In September alone, Apple, Samsung, Huawei, Xiaomi, OPPO and vivo launched new products together.

Mobile phone manufacturers release new products day and night, but people who buy mobile phones are not enough. According to the data of the Ministry of Industry and Information Technology, as of September 2019, the penetration rate of mobile phones in China has reached 114.5 units/100 people. In addition, according to the National Bureau of Statistics, the supply scale of mobile phones in China began to decline year by year after reaching a peak of 1.89 billion in 2017.

According to the statistics released by IDC, in the first half of 2019, China's smartphone shipments were about 180 million, down about 7% from the same period last year. In the third quarter, China's smartphone market shipped about 98.9 million units, down 3.6% year on year.

If the incremental market is saturated, and a large number of idle mobile phones flow into the market transaction link, which brings about the prosperity of the second-hand mobile phone recycling market, then the high-speed generation of smart phones and the immaturity of 5G commercial use will bring the second-hand mobile phones from the previous sinking market to the general public hovering before the 5G replacement trend at a faster speed.

According to the Research Report on the Second hand Mobile Phone Industry released by Krypton 36, since 2018, nearly 80% of users' smartphones have been stacked at less than a year's pace, and a large number of mobile devices have been idle before reaching the retirement state. In addition, with the accelerated depreciation of mobile phones and high repair costs, second-hand mobile phones undoubtedly provide a more cost-effective option at a time when the recognition of second-hand transactions continues to improve.

01

Second hand mobile phone ≠ Xiashen market

From the sale of second-hand mobile phones by consumers to the counter in Huaqiangbei, Shenzhen, after the recyclers switched hands several times, a detailed and complete industrial chain has been formed for second-hand mobile phones offline. However, due to information asymmetry and the non-standard characteristics of "one machine, one product", the online rate of second-hand mobile phone transactions is only 20%.

How big is the second-hand mobile phone market?

A report by the People's Daily in 2017 pointed out that the stock of discarded mobile phones in China has reached 1 billion, while the recovery rate is only about 2%, and there is a market scale of 100 billion for second-hand mobile phones only. As for the sales of second-hand mobile phones, a research report shows that it is estimated that in 2017, the cumulative transaction size of refurbished mobile phones alone in the world will exceed 48 billion dollars.

The sale of second-hand mobile phones is one of the most important ways to realize the value of the second-hand mobile phone recycling chain at the end.

So, who is consuming second-hand mobile phones?

"70% of users in third tier cities and below, 85% of male users, 18-40 years old, mainly college students, followed by blue collar workers, and white-collar workers again." This is the answer given by Wen Yanjie, founder and CEO of Liangji.

Young and middle-aged men are the core user group of second-hand mobile phones. The statistical results from the second hand trading platform of JD also confirm this conclusion. Male users aged 16-35 in second tier cities and below are the target user portraits.

On the surface, the second-hand mobile phone business, which seeks high cost performance at the expense of some experience, is a typical business in the sinking market. However, according to the data of the Liangji platform, the first tier cities account for about 11% of the total transaction volume, while the second tier cities account for 18%. The proportion of sales volume is one-to-one corresponding to the hierarchical distribution of urban population.

In addition to the basic balanced spatial distribution of users, the customer price of second-hand mobile phones does not have the typical characteristics of the sinking market. According to the data of China Industry Information Network, as of 2018, the smartphone market in China is still dominated by low-end users below 3000 yuan, accounting for 74.4%.

The data from Paipai shows that the price range of the platform's best-selling mobile phones is 1500-2000 yuan, and the best-selling brand is Apple.

Second hand mobile phones come from a variety of sources. Mobile phone manufacturers' official turnover/official turnover, physical stores' display machines/prototypes, and e-commerce platform spare parts warehouse are common B-end sources. In addition, used mobile phones collected from huge consumers through recyclers/recycling platforms are also one of the considerable supply channels in terms of both incremental and stock.

In addition to offline physical stores, online second-hand mobile phone transactions are mainly divided into C2C and B2C. C2C mainly relies on the second-hand trading platform of traffic volume, such as idle fish and transfer. In addition, the platform also provides C2B2C mode performance services, namely, optional machine inspection and consignment services.

The B2C mode mainly focuses on e-commerce self operated second-hand mobile phones. The e-commerce platform provides quality inspection, sales and after-sales services for second-hand mobile phones, including self operated, leisure fish premium products, and transfer premium products.

For second-hand e-commerce, most of them have tried to diversify their service models, that is, the C2C platform also covers proprietary business, and the B2C platform also has C-terminal oriented recycling business.

02

Giants enter the arena, and unicorns abound

Whether it is to expand from mobile phones and digital 3C to other categories, to build a comprehensive second-hand trading platform, or to lay out leasing, maintenance and other businesses along the upstream and downstream of the industrial chain with sales as the core, to build a vertical trading platform, it is an attractive and imaginative market.

For example, based on the B2C business of second-hand mobile phones, Lieliang Mobile, which was founded in 2015, has developed a 3C vertical trading platform covering mobile phones, tablets, laptops, digital accessories and other categories to connect recycling, sales and leasing businesses.

At present, there are more than 1.5 million active users looking for Liangji, with an annual repurchase rate of 40% for all categories and an annual revenue of more than 5 billion yuan. As the core mobile phone category, sku reaches 40,000 to 50,000. The monthly GMV of single mobile phone products accounts for 80% - 85% of the total, and the after-sales rate is about 7%.

In the case of startups, the "care" of giants is inevitable. Ali, Tencent and JD have their own layout in this field.

Among them, Xianyu and Tencent are the largest comprehensive platforms in the field of second-hand e-commerce. In the category of mobile phones, the two companies have a similar approach - they provide B2C, C2B2C and other diversified service models on the basis of C2C based transactions.

According to the mobile phone transaction data of the transfer platform in December 2018, C2C's personal transaction behavior accounted for 65.52% of the total, and B2C's proprietary mode and user consignment mode accounted for 19.93%. At the same time, nearly 90% of users who turn to second-hand mobile phone transactions have chosen the machine inspection service.

Jingdong chose another approach. On June 3, 2019, the second-hand commodity trading platform "Paipai" under Jingdong had a strategic merger with Aishou, and announced a new round of financing of more than 500 million dollars led by Aishou. Before that, JD had participated in the recovery financing of Love twice.

After the merger, Aishou+Paipai+Paiji Hall has formed a pattern of "recycling+B2C platform+B2B platform". At the same time, Aishou will operate its credit rental platform "enjoy changing phones" independently. Aishou will access JD proprietary mobile phones, Huawei, Xiaomi and other official recycling channels.

03

Homogeneous competition is fierce. How can vertical platforms break through?

The sales of second-hand mobile phones are not separated. With the expansion of business boundaries, homogeneous competition between platforms is inevitable.

WeChat has opened its entrance for transformation. Behind the leisure fish, there are Taobao, Zhima Credit and other Arab ecosystems. It likes to recycle and pat the traffic of JD. In the face of the traffic injection and platform endorsement brought by the entry of giants, how should vertical platforms such as Liangji deal with the competition?

For second-hand mobile phone transactions, consumers focus on two things: quality and price. However, due to the opaque transaction process and poor consumer trust, the choice of platform self support is largely based on brand endorsement.

Due to the high degree of homogeneity of services, traffic may determine the base of second-hand transactions, but the stickiness of second-hand transactions leads to a positive correlation between users' migration costs between platforms and service satisfaction, or trust.

Although the platforms are focusing on quality inspection and quality control, the subtle differences between services still constitute competition.