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Making the grade: setting a standard for refurbished phones

Paul Lipscombe
July 1, 2021

Refurbished phones are on the rise, but there’s no industry standard for grading. Should one be set?

The smartphone industry is growing, but not as fast as the refurbished sector – a segment set to be worth £47 billion by 2023, according to IDC.

This ‘secondary’ market has grown substantially in recent years as the cost of handsets has risen, driving more consumers to trade in perfectly fine, older handsets.

But one activity in the refurbished segment that has often blurred lines and created confusion is the grading of devices. To date, there is no industry standard for doing this either agreed between different firms or by an independent regulator, and companies implement their own procedures and checks.

At last year’s Mobile News XPO in March, the idea of a universal one-size-fits-all grading system was touted, while similar thoughts were expressed in our recent interview with Xcess Trading’s Debra Barr (Mobile News, issue 706).

We contacted several of the refurbished industry’s key players to get their thoughts on a grading scheme that could be followed by the whole market, as well as insurers, repair specialists and an industry analyst. 

An Xcess Trading ‘Grade B’ might differ from another firm’s ‘Grade B’S

Should there be an industry standard for grading refurbished smartphones?

Debra Barr, managing director, Xcess Trading: Yes there should. Most businesses that work in returned or refurbished stock have grading criteria, so will have ideas on this. Some use accredited functionality testing so you know the phone is functionally sound, with people like Blackbelt as an industry leader in this. Then there is Checkmend, which checks if the device has ever been reported lost, stolen or blocked by a network.

Kester Mann, director of consumer and connectivity, CCS Insight: I think it would be very beneficial to have one, but it’s probably quite difficult to implement in terms of the industry coming together to decide what constitutes a near- perfect new device compared to one that has a few bumps and scratches on it, and should be in another tier. Those sorts of things are quite difficult for the industry to agree on; you need a lot of collaboration across a lot of parties.

Craig Smith, managing director, Mazuma Mobile: Yeah, I do. Last year, prior to the lockdown, I was part of a panel at the Mobile News XPO where we discussed the second-life market and this was one of the points I made then – that there needs to be an industry standard in grading because it differs and can cause a lot of problems along the supply chain.

Simon Harrison, head of business development, PCS Wireless: As demand from multiple channels increases for refurbished handsets, it is undoubtedly time to drive towards an industry standard for grading. This would ensure continuity and uniformity through the lifecycle of a mobile device and consistent flow through distribution chains. Generally, grading criteria in the market are incredibly complex, resulting in end- customer output of a limited range of grades. This simple output belies the complexities further down the distribution chain, where it is not uncommon to see organisations using a much larger range of grades. The requirement for more specific grading around cosmetic and functional grading is more relevant than the commonly seen broad-brush grading of A, B and C.

Diamond Liu, CEO, Skyrise Distribution: It is very necessary to have an industry standard so that it is easier for us and our customers to reach consensus on the standardisation of the whole industry, and commit ourselves to the healthy development of the refurbished mobile phone market.

Matt Thorne, co-founder, Reboxed: Absolutely – there needs to be accountability in selling refurbished and used products, as we have to protect the consumer. A standard would inject more trust into the space and make refurb a truly viable mainstream option for people even initially looking to buy a new device.

Pieter Waasdorp, managing director, Renewd: Current grading methodology is highly confusing, with major players having their own criteria. However, we feel that due to the structure of the secondary market, it’s highly unlikely that industry standards will be implemented soon. Renewd has a different approach towards grading, with an objective of not confusing the end user. We simply have one grade: Renewd. Our pre-owned refurbished devices are cosmetically comparable with a ‘grade A’ device, though minor traces of use are expected; but, most importantly, technical functionality has to be 100 per cent.

Sunny Ratnam, founder and director, GTM Instant Access Europe: It is widely recognised that the refurbished device market has huge growth potential, largely through its low cost and social/environmental kudos that appeals to all demographic groups. As an industry, we need to think differently to get away from the traditional ‘quick money’ turnaround, focusing on the needs of end users to build a credible offering that derisks dealing in refurbs. Standardising the grading criteria for refurbished devices would be a big step forward in achieving this.

Shane Matthews, sales manager, WJD Repairs: I think there should be, as there are so many variants across the industry of differently graded units. But I imagine trying to put this in place would be very difficult to do.

Blurred lines: Three seemingly similar phones but with three different grades.

Why should there be a set framework in place for companies to follow? 

Mann: It’s about transparency and being able to compare one device with another. It’s a lot easier for people to buy phones online now, with consumers a lot more confident. Something like this would help consumers because it would provide them with more information and help them compare devices with different grades from different sellers.

Smith: With the growth in the market that we’re currently experiencing, the industry is becoming much more mature and accepted, and needs that level of confidence running through the supply chain. It has, to a degree, developed its own standards over the years, but with the way it’s developing, it just needs that level of assurance and an industry standard to become a credible business opportunity for everybody.

Simon Harrison: The quality of refurbishment is critical for the future growth of the refurbished market. Control over grading, workmanship and parts usage is therefore key, as the market has to continue to drive confidence in products. The choice of refurbished partner is critical for businesses to ensure that supply is consistent and meets the quality the end customer requires. A uniform grading approach would help in these transactions to build confidence in evolving Western European markets.

Ratnam: Regulation is often perceived as a negative, but to me it is a necessary stepping stone for taking something with potential to actually achieving it. Having spent a lot of time talking with customers on this specific subject, it is clear that confidence in buying refurbished devices is low, which is for sure having an impact on the growth of this sector. They see it as a ‘trader’ industry that doesn’t provide the same aftercare they are used to and that could be perceived as a risk on high- value goods. By introducing a set framework, the consumer would learn to trust that what they are getting is what they expected and growth would accelerate as a result.

Josh Harrison, founder and director, Mobio Distribution: I feel that a fair grading standard could only be a good thing for the industry, and especially end customers. Standardised grading industry-wide would increase consumer confidence in used and refurbished devices, and would also have the potential to reduce the complexity of B2B trading. One of the first questions asked when you begin talking to a new business is: “What is your grade C like?”; or “Please can you send over your grading criteria?”. Even once this is confirmed, you are still likely to proceed with caution until you have inspected physical stock.

Paul Schofield, owner, BlankIT: Setting a standard once and for all would remove most of the ambiguous issues to allow stock to flow more freely between ‘The Trade’ and ultimately to the end user. Once a standard has been achieved, a common message can be publicised to the purchaser to set expectations ahead of time. With respect to end users, this would reduce customer returns, poor online feedback and ratings, thus enabling the seller to command a higher value due to customer confidence.

Barr: These tests and checks need staff; they also need systems that can automate the collection of data once a test has been done and link it to the IMEI [international mobile equipment identity]. Systems and staff cost money, so most people don’t want to do this.

Thorne: It’s hard to do consistently, requiring a level of rigour that the supply chain probably isn’t ready for, and some more technology around cosmetic grading. But ultimately, doing so will eat into profit margins. I think a lot of sellers get away with loose grading terms to their financial advantage.

Waasdorp: The secondary market is still highly fragmented, although we believe that consolidation will begin sooner rather than later in what is still a rather immature market. There are still too many shady processes, or those who are looking for a quick win. A framework can only be implemented if forced upon the market externally – for example, through government policy – or if those in the secondary market join forces, but we don’t see this happening yet.

Simon Harrison: Historically, grading is extremely subjective and differs based on the position of the device in the supply chain. The requirement to provide simple, clear grading practices at retail is paramount and has led to a general market conditioning over three grades. But this doesn’t hold true through the distribution chain, in which firms will offer a much wider range of grades for more specific criteria. The added complexity of human subjectivity is also a key issue in grading. This is because while the criteria can be made very explicit, there is still a reliance on visual inspection, which can lead to errors in judgement. The rise of robotic (AI) grading will be interesting over the next couple of years and will be a catalyst for more universal grading.

Ratnam: There will undoubtedly those out there who prefer things to stay as they are, citing the increased cost and other challenges as a reason, but that is a short-term outlook in my opinion.

Josh Harrison: There are many reasons for this, but I think the most simple answer is industry maturity. As this sector develops, we will inevitably move towards more standardisation and aligned thinking. I suspect that many small and medium- size wholesalers would be uninterested, or potentially even push back against a grading standard at present. The handset game is extremely competitive, and for trading companies that don’t have access to their own buyback programmes or ‘untouched’ devices direct from networks or returns, it can be very thin-margin work. This leads to a tendency to push the limits of grading and potentially oversell the quality of stock in order to eke out a little bit more margin. It’s very possible that standardisation of grading would make business for some trading companies unviable.

What challenges are there to creating a grading system?

Mann: The challenge would be getting people to agree on how to define each tier. There’s a lot of companies involved, so it would take a lot of doing. Another challenge is around who is involved – is it the refurbishing companies, operators or manufacturers that take leadership of this?

Simon Harrison: The challenge is around defining criteria that meet the requirements of the multiple parties in the distribution chain, from repair and refurbishment companies to distributors, e-tailers and end consumers. All these parties will have different requirements for device grading, so the level of complexity is incredibly high.

Smith: The challenge is how do you do it? Who does it and what are the consequences of not meeting the standards, other than the obvious? If you’re going to sign up for something and agree it with the industry, the challenge is first getting it done and then how you keep it running. I don’t think there is too much disagreement between the major players about what a grade A, B or C is, and I find that a lot of the companies I speak to speak a similar language. But the challenge is getting people to all agree to the specifics of standard. I do think overall the major players could agree that. The challenge would then be to keep it at that level. Schofield: Due to a standard not being set early, each business has created their own version of a standard that they have settled on. They all believe their standard is the correct one and rarely deviate from their comfort zone. As we see across and handle most of the UK routes for used devices, we see a huge variation in standards.

Ratnam: There are some who will be resistant to change – and even if regulations come in, some may not follow it, making for a cumbersome and resource-heavy process to police. There is also the challenge that things didn’t start in a standardised way. This means some practices that will need to change have become ingrained in the industry, so it will take a lot of education and management to transition those within it to allow for a more sustainable sector.

Matthews: I think it would be too difficult to implement across the board. Getting companies to commit to it will be the biggest challenge. A lot of companies upgrade a C to what they deem to be a grade B or even grade A to maximise their profits.

Mobile repairers have also backed the need for an industry standard in grading refurbished handsets

Do mobile operators and manufacturers need to help with defining a standard for refurbished devices? 

Simon Harrison: As always, OEMs play a huge part in the refurbishment of devices, and need to provide support and access to genuine parts to ensure brand consistency through the refurbished market. MNOs, for their part, help deliver confidence in the wider market through the inclusion of refurbished devices in their portfolios, so are critical in inspiring growth in the channel.

Smith: For mobile players, it is in their interest. Look at Giffgaff, for instance, which is a big ambassador of refurbished kit. I think it does work for the networks and not necessarily the manufacturers, although you are now seeing these vendors offering refurbished products. Is it in the interest of mobile phone vendors? Not really, because they want to promote their new products.

Ratnam: Though in my experience it is more suppliers that this applies to, it is in the interest of both networks and manufacturers that refurbished devices are more trusted because this will ensure better customer experience and support the maintenance of brand perception. From a manufacturer’s point of view, regardless of whether it’s a phone’s first or second life, it will be their brand that a customer sees on the device, so they will want the experience to be optimal. With the networks, they also want their customers to have the best device functionality so as to allow them to use more data through streaming and other activities. Both, therefore, have a vested interest in making sure that supply is regulated and could use their influence to ensure standards are met.

Liu: Industry standards really need to be developed with the major mobile network operators, which are big customers of insurance companies.

Waasdorp: We don’t think so. Self-regulation and common sense are needed to come up with an industry standard. In some European countries, the industry joined forces and came up with a special certification for used and refurbished smartphones. This is often backed by authorities and consumer organisations.

Do the big-name vendors have an obligation to provide access to parts to allow any new standards to thrive? 

Mann: Companies such as Apple tend to be very controlling in terms of warranty and are very particular about getting repairs done by authorised Apple partners. That’s a challenge for the industry to work its way through. It’s possible that the refurbished market could be seen as a bit of a threat to the device makers, but you could also argue that people are starting to consider the resale value of their smartphone when they buy it in the first place. In that respect, if it’s a device that is suitable for trading in, then that’s a positive as well for selling devices as brand new. This can be an incentive for vendors.

Ratnam: From a manufacturer’s point of view, regardless if it is first life or second life of the phone, it will be their brand that a customer sees on the device so they want the experience to be optimal. There will always be copy parts due to the cost difference between those and OEM and for the most part this doesn’t appear to affect the experience of the user. Of course, ideally the parts are cost- effective enough for copy parts never to be used but this is unlikely even if from a brand point of view it would be beneficial.

Simon Harrison: Ultimately, the device brand is associated with all refurbished devices, so more availability and access to genuine parts is a critical aspect of the whole concept. The ability to upcycle and reuse devices in the market should be a critical element in the strategic thoughts of all manufacturers. This not only delivers sustainability through the device lifecycle, but also broadens global market share and drives usage of OEM platforms and subscription services.

Smith: You look at the ‘right to repair’ policy that is prevalent today, and that should be how it is. People should have the right to repair, and not just for mobile phones – there are a lot of products. But doing this can be quite difficult, not just in terms of technical ability but also sourcing credible parts. I think everybody would agree that mobile manufacturers could do more. Parts are very expensive and difficult to access: it’s very hard to access genuine Apple parts, for example.

Schofield: Big-name vendors understandably worry about non-genuine parts and where the liability falls in trading devices that are not 100 per cent genuine. Quality inspections are no longer only about the functional and cosmetic condition of a device, but now more about the actual quality of each component part. This takes years of experience to understand and train into a QC [quality control] team, while digital QC software is great but can be fooled. Continuous learning is needed to keep up.

Barr: I’m not sure. Most OEMs want consumers to buy new stock, so they don’t want older devices being reused – that’s why you get the firmware updates that cause device obsolescence. However, you can see on Apple’s website that it sells refurbished stock with a warranty because it knows there is a market for it.

Ian Mazuro, head of product at NSYS Group: Manufacturers are interested in taking this market over with their own supplies. Having the facilities where handsets can be inspected and fixed, they set the tone in a way but the market of used devices should remain open for alternative high quality suppliers.

Apple: Big name vendors such as Apple can do more to support this industry with easier access to genuine OEM parts

Who would benefit from an industry standard for grading refurbished phones? 

Simon Harrison: The whole industry would undoubtedly benefit from a uniform grading standard, in that it would aid confidence in the endless transactions that take place throughout the device lifecycle. Ultimately, the end user needs to have confidence in the product they are buying.

Smith: I think everyone would benefit. The end user would benefit because it would give them an opportunity to get a better product at a good price. They would also benefit, as the industry would be regulated and they would get a better standard of product. I think people involved within the industry such as retailers, e-tailers and wholesalers would also benefit. Furthermore, I think it would force some of the companies that are less ethical and scrupulous out of the market.

Ratnam: Potentially everyone. As I say, there will be short-term challenges and increased costs, but the long-term benefit to customer experience and reduction in cost to serve will far outweigh this for manufacturers, brands, wholesalers, resellers and the end user.

Waasdorp: End customers. Selling used products is all about selling trustworthy products. If warranty and grading are clear and transparent, then consumers and businesses are more willing to buy and make use of used products. We see, every single day, the advantages of a single grade supported by a warranty and a refurbished certification.

Schofield: Apart from traders that rely on the misrepresented stock, everyone. The used device market is often referred to as too complicated when buyers are so used to trading new devices that only have conditions such as ‘new boxed’ or ‘new handset only’, whereas used devices come with a plethora of different conditions that look more like an endless menu. An industry-standard grading document would at least give a structured knowledge base to which all could refer and a centralised ‘database’ that could be constantly updated with new knowledge.

How can a framework be introduced? 

Simon Harrison: The only way this can be truly implemented is through increased usage of technology to remove the subjective nature of grading. This would enable the industry to agree grading criteria, and provide a more robust and consistent analysis of device grades, aiding the ultimate goal of environmental sustainability and customer confidence.

Barr: Functionality can be tested using industry-standard testing software like Pervacio, Blackbelt and Phone Check, which give you a pass certificate. A phone’s background can also be checked via an approved company such as Checkmend. A visual grading matrix can also be used that is supported by videos, text and images. If you were inspecting a car, for example, you would want an MOT test certificate and a service book, and then you would want a video of the car. Mobile phones are assets just the same.

Smith: I think you’d probably get the major players together that are seen as leaders in this market to agree to a UK standard policy and get the ball rolling. I can think of us and a good dozen or so other companies that could get around a table to discuss that. The next piece of the jigsaw is to put some compliance and regulation in place for the industry.

Ratnam: I am not an expert in this field, as regards establishing the process, but from an implementation point of view (probably the trickiest part), I would recommend a clear overview of the benefits to win over those in the industry. This would need to consider each type of individual that operates within the market and tailor the messaging to make it relevant to them and gain buy in. Cooperation is essential to implement any form of change, and to some this would be a big one.

Liu: This needs to be discussed with major mobile network operators and insurance companies, which are representative of the industry, to decide on a standard and implement it with all parties.

Schofield: We need to gather all relevant parties to have their say, giving an equal chance for each proposed standard to be aired. We also need to review current ways of doing things. Then we have to agree which standards are to be written, and by whom and when. From there, we can agree on a method for distribution of the draft standard among all parties for suggested amendments. When the majority agree to final standards, a version-one document can be created and made public as ‘The Standard’, with feedback asked for. We can re-review market-wide feedback to see if we wish to change anything. Then we can create a public-facing document that is centrally controlled and updated according to new learnings as we go.

Thorne: That’s what we’re working together, these will give a tech score that’s transparent and easy to understand. From a test point of view, it will be like a mobile ‘MOT’, but the difference is that there’s not a pass or fail outcome. It has to be as transparent a score as possible.

Mazuro: All refurbished phones should be fully functionally tested and graded using software solutions that have recently become available. This framework completely excludes human errors from the QC process and takes it to a whole new level.

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