– [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..
