A bad shopping experience on-line of a second-hand cell phone opened Sami Marttinen’s eyes. Seven years ago, the 31-year-old entrepreneur paid for a refurbished iPhone 6 Plus that he never received. After verifying that he was not the only victim of this fraud, he began to investigate the telephony market. Realizing that 83% of the carbon footprint generated by smartphones is due to its manufacture and distribution, as a Deloitte study warns, wondered: “Why do only 5% of the world’s population choose a refurbished device?” To bring consumers closer to this sector, Marttinen and his partner Jiri Heinonen founded Swappie in 2016, a company that buys and sells used iPhones, after subjecting them to thorough inspections to verify their operation.
When Swappie moved its first steps, second-hand smartphones represented 5% of the European market. This percentage has now tripled. according to him Global Refurbished Smartphone Market Report. “The evolution of this sector is comparable to the development of used cars. If in the nineties, second-hand vehicles were 10% of the total, now they are half. Hopefully the same thing happens with mobiles, ”says Marttinen.
The turnover of the Helsinki-based company supports the strong growth in second-hand mobiles over the last five years. Swappie’s revenue went from €500,000 in 2017 to €97 million in 2020, according to the most up-to-date data provided by the company. Marttinen laid the foundation for the firm by drawing on the savings he had accumulated over ten years as an entrepreneur in various sectors. However, as of 2020 Swappie also benefited from external capital: it accumulated around 150 million euros after holding two rounds led by Verdane, Lifeline Ventures and other investors sensitive to the defense of the environment.
The two founders noticed that the prices of smartphones new ones did not stop climbing. At the same time, the novelties provided by the latest models had lost relevance compared to ten years ago. “Device update cycles have gotten longer. Consumers are no longer used to changing their mobile every year, and are more open to buying older models to save costs”, he adds. According to data collected by the consulting firm Kantar, in March 2021 consumers in Spain, Italy, Great Britain, Germany and France kept the same device for almost three more months compared to March 2019.
In addition, as the years go by, the environmental impact has a greater impact on the purchase decisions of users, especially among the younger generations. More and more millennials are leaning towards refurbished devices as they are more sustainable, Marttinen weighs. However, only 25% of consumers sell their old phones for recycling, showing that there is still a long way to go to build confidence in second-hand market players.
Sustainable consumption
Swappie currently operates in 15 countries. Finland, Sweden and Italy are its strongest markets. The Nordic countries have more internalized the circular economy compared to southern Europe, where some citizens are still reluctant to buy second-hand products, says Fanny Niman, executive director of the company in Spain. According to the firm’s latest survey, 70% of Spanish consumers consider opting for a refurbished device when changing their mobile, but only a third would choose it for sure. “It is a considerable gap. Many users have yet to find out that second-hand devices are tested and have a guarantee against any technical failure (24 months in the case of Swappie). Empowering brand communication is the first step and Italy was an excellent test bed in this regard”, she points out.
The Finnish company has its operations center in Helsinki, where 400 technicians scrutinize the conditions of the hundreds of mobiles that arrive at the laboratory every day. After canceling the stored data, specialists check the status of the battery, camera and speakers. If the phone is in perfect condition, it is ready for sale. Otherwise, you will have to go through the repair department.
Robert Evans, an expert in micro-welding who has been at Swappie for two years, says that changing the battery is one of the most common actions when it comes to giving a mobile phone a second life. Glues, tiny chips and tweezers of different sizes flood his work table. “It’s like surgery. This activity requires a lot of concentration and requires between half an hour and an hour, depending on the conditions of the device and the skills of the technician, ”he explains. Overall repairs generally take less than a day to complete: the phone goes into the operations center in the morning and is refurbished by the end of the day.
However, the aesthetic characteristics are the ones that most influence the final cost of a second-hand device. In Swappie’s rating department, technicians review screen defects and assign a score between A and D that reflects the condition of the phone: excellent, very good, good, satisfactory. The price range of the iPhones sold by the Finnish company is very wide, from 150 euros to more than 1,000 euros, depending on their conditions and the type of model. Otso Ojanen, director of operations and logistics of the firm, admits that it is difficult to establish which are the most requested by clients. “If Apple now sells mostly iPhones 13, in Swappie generations seven and eight continue to enjoy some success, because they are cheaper,” he says.
But why has he focused his business on iPhones? Ojanen notes that Apple is only one of the mobile manufacturers, but believes that focusing on a single brand was the key to streamlining operations and achieving success. “Android is a very broad operating system and refurbishing phones from various brands would be much more complex. We would need thousands of different stocks and a staff that is capable of repairing all the models”, he points out. Marttinen adds that the company with the bitten apple continues to have a large market share, as consumers love the simplicity of its design and functionality.
However, for many the price represents a barrier. “That’s where Swappie comes into play, with its proposal for mobile phones that, although they are not the latest generation, are cheaper and more ecological,” he adds. Of course, in Spain the popularity of Android is overwhelming: 83% of devices have this ecosystem installed, according to data from Kantar this year. The success of Google’s operating system may be an obstacle for the Finnish company when it comes to attracting new customers.
Swappie does not close the door to expanding its business to other product categories in the long term. “In five or ten years, I don’t see why the second-hand market can’t be extended to all devices. But iPhones still have great potential and we have a lot to do in the sector. This is just the beginning”, he concludes.
