Back Market is an online platform for refurbished devices. As such, it doesn't refurbish used devices on its own. Instead, Back Market provides a way for refurbishers to sell their products as well as a way for interested individuals to buy them. Very recently, it managed to raise $120 million from Goldman Sachs as well as other sources of funding, which is a rather interesting expression of confidence in its profit-making potential.
Less Vulnerable to High Prices
First, there has been a fall in the demand for new smartphones for some time. This makes sense because manufacturers release new smartphones at a much faster rate than most consumers use up their purchased smartphones. As a result, when most consumers think about whether they should buy a new smartphone or not, they aren't weighing the cost against the alternative of having no smartphone but rather the alternative of having a somewhat less capable smartphone that is nonetheless more than capable of meeting their smartphone-related needs. Certainly, there are some consumers who can afford to buy the latest smartphones as soon as they come out without having to think about their finances. However, the same can't be said for most consumers, particularly since the newest smartphones tend to be the most expensive smartphones as well. Refurbished devices have a major advantage in this regard because they are so much less expensive than their new counterparts, thus making buying a more appealing choice when compared to not buying.
Less Vulnerable to Environmental Concerns
Second, more and more people are becoming more and more concerned about the environment. Something that is very understandable considering the potential consequences of inaction in this regard. As such, more people are making more environmentally-friendly consumption choices. Naturally, manufacturers have responded to some extent by using more recycled materials as well as making other environmentally-friendly gestures. However, new smartphones cannot hope to compete with refurbished devices when it comes to being environmentally-friendly, which is something that could cause eco-conscious consumers to choose the latter over the former in the future.
Access to a Wider Range of Products
It isn't uncommon for manufacturers to make premium versions of their products that can cost $1,000 or more. For a lot of consumers, such price tags put such products outside of their reach. However, if interested individuals are willing to wait a short while, they can get their hands on a much cheaper refurbished version of these premium products. As such, one could make the argument that Back Market could make a wider range of smartphones available to a wider range of customers than otherwise possible, thus expanding the size of its potential user base.
One of the biggest issues for sellers of refurbished devices is that they have access to a limited market. After all, while there are a lot of people out there who want smartphones, the number of retailers means that there is a lot of competition even within the local region. By using the Internet, sellers of refurbished devices can find more potential customers, thus providing them with better chances of faster sales at better prices. However, there is a major issue for them in that setting up such an operation on the Internet is neither simple nor straightforward, not least because potential customers tend to be very wary when it comes to refurbished devices that they cannot check out in person for good reasons. As a result, it can be rather difficult for sellers of refurbished devices to build up their brands to the point of becoming capable of overcoming this kind of caution. By using Back Market, they can make use of the online platform's reputation rather than their own to a considerable extent, thus enabling them to reap the rewards without having to put in an incredible amount of time, effort, and other valuable resources. Meanwhile, customers benefit because an online platform such as Back Market can provide them with a wider range of refurbished devices at a wider range of prices. Something that should provide them with better chances of finding something that they want in exchange for no more than a small fraction of the search time than if they head out searching through brick and mortar retailers.
Trust is one of the biggest barriers when it comes to refurbished devices, which is problematic for both potential buyers and potential sellers. For potential buyers, if they can't trust in the quality of their purchased product, they can't benefit from the potential benefits of buying refurbished devices. Similarly, if potential sellers can't get potential buyers to trust them, they can't make money by selling their products. Back Market exists as a kind of solution for these trust issues. Simply put, it can verify its sellers to make sure that they are legitimate and that their products are reliable, thus providing its users with a measure of confidence that they will get what they pay for. This can be particularly important because Back Market operates on the Internet, thus making its business model riskier compared to the brick and mortar version in spite of its other strengths.
On the whole, it seems reasonable to say that Back Market could have a promising future. One, it has a customer base that exists in the present time, which is expected to increase in the near future. Something that should make it easier for it to facilitate sales. Two, it provides a service that is useful for both segments of its users. Moreover, it adds value to that service, which isn't something that a competitor can duplicate unless it is willing to put in a similar amount of effort. Combined, it is no wonder that Back Market has managed to get so much interest.
Having said that, it remains to be seen whether Back Market will be capable of continuing to make good use of its advantages in order to grow its business. Its business model can be replicated by others willing to put in the resources. Furthermore, businesses can run into a wide range of other potential threats to their profitability. As such, it will be very interesting to see how things progress in the times that are still to come.
Written by Allen Lee
Read more posts by Allen Lee