- [Joanna] So you just traded in your dirty old phone.
(tape zipping) (bell dinging)
It's now part of the $64.5 billion secondhand phone market.
In 2022, 73.5 million used
and refurbished phones were shipped in North America alone.
It's an exploding business, and that's because phone makers
and the cellular carriers have pushed us all to.
- Trade in. - Trade in.
- Trade in. - Trade it for something new
that suits your life now.
- But who's winning and losing in this booming market?
When I asked the carriers
and Apple to show me where the phones go
and if and how they make money on them,
they wouldn't speak about specifics.
That's why I came here to a warehouse
in the middle of New Jersey.
Every week, this facility owned by US Mobile Phones
receives tens of thousands of devices,
primarily Apple from cellular carriers.
- So this is three pallets that just came in
and it should be around 3,000 iPhones.
- The company then sells those phones.
Some go to wholesalers in other countries,
others get cleaned up,
put through the refurbished process and sold
to individual buyers on sites like Amazon or Back Market,
a popular refurbished phone marketplace.
We got an iPhone 11.
- This one's a great example
'cause it's still kind of dirty.
- [Joanna] Yep, I picked out that 128-gigabyte iPhone 11
to track the cycle and how it goes
from arriving here with a trade-in value
of $200 to leaving here with a price tag of $350.
To understand, we have to go through the refurbish process.
The first stop for our iPhone 11: data erasure and triage.
- We take the phones, we start connecting them over here
to these computers that are all running special software
to remove any potential customer information
from the devices.
- [Joanna] After that, the phone is put to the test.
Well, many tests.
You can't sell a phone that doesn't work.
- [Sammy] Nice and white, no shadows.
Now checking the reds.
We're good status there, right?
So you take a screenshot,
now hit the slide switch up and down.
Say cheese.
- [Joanna] That obviously does not look good.
- [Sammy] That's 'cause of you.
We're not gonna blame the phone for that.
Say cheese. (camera snapping)
(phone beeping) - [Joanna] Ooh.
- [Sammy] So that was it checking speaker.
On the front over here, it's checking flesh.
You see the light on my hands?
So you can say yes, it's on.
- [Joanna] I'm really not good at this.
- [Sammy] It's okay. It's day one.
You're doing pretty good.
The devices now do a test call.
- [Joanna] Success. Our iPhone 11 passed all the tests.
The next step, cleaning.
- Toothbrush, plastic peg,
microfiber cloth, foam sponges, hand sanitizer.
(tranquil music)
- Looks nice and clean.
After that, it's onto grading where someone looks
over the device and assigns it a grade
so they know how to price it.
- [Sammy] Gonna look at the front glass, the housing,
the back glass, if there's any scratches.
- [Joanna] Success again, our device got an A.
And the final stop, kitting.
- We're gonna take this and put it into a kit box
so that we can get this shipped out to our customer.
- [Joanna] US Mobile Phones has a sister company
called Back in the Box,
which is responsible for selling refurbished phones directly
to consumers on sites like Amazon and Back Market.
Before the phone is shipped, the company packages it
with a charging cable and with lots of padding.
- Drop it. Drop it.
- I mean... - You could drop it.
- Our poor phone.
(Sammy chuckling)
(phone dropping)
Okay, so now it's ready.
But how much is someone going to pay for it?
Well, for some context,
Apple doesn't make the iPhone 11 anymore
but you can still buy a brand new 128-gigabyte model
for around $500 at some retailers.
Back in the Box obviously has to undercut that.
- Typically what we like to do is we like
to price refurbished products depending on the grade
between 20 to 30% below its retail price and generally,
that gives a good discount for the consumer
and gives us enough margin somewhere between 10-15%
to be able to have some money, have some profit to then go
and buy more inventory and support the business.
- [Joanna] On its website, Apple says the trade-in value
for a used, good condition iPhone 11 is $200.
Back in the Box told me it bought the iPhone 11
from a carrier for around $250.
Then after the phone was refurbished,
it listed it for $350 on Back Market,
which takes a 10% cut of that sale.
Back in the Box takes home around $65,
but that's not all profit.
- Put a ton of labor into cleaning that device.
There's also a charger in that box that we have to pay for.
There's also a ton of devices that came with that,
either had a bad battery
or at some other defect that we have to sell at a loss.
So we have to make enough profit
on the good ones to be able to absorb the hit
on the bad ones.
- So what did we learn here today?
Well, that there are more winners
than losers in this business.
The cellular carriers win when you trade in an old phone
and buy a new one.
Refurbished companies win when someone buys
a refurbished phone and consumers
and the environment win along the way.
- The downside is maybe to the stock price
of the manufacturers that wanna sell
as many brand new retail products.
- [Joanna] Perhaps, but even for Apple,
if all these phones end up
in the hands of more people, particularly
in developing countries, it means growing market share
and more people buying into the iPhone circle of life.
(Sammy singing in foreign language)
(Sammy chuckling)
- That's all I got for you.
- [Joanna] That's very good.