The demand for second-hand mobile phones is consistently on the rise. Persistent Market Research indicates the used and refurbished mobile phone market will reach approximately 40 billion dollars in global revenue by 2025 – almost doubling in revenue since 2017. The increase in residual value of mobile phones and greater options to trade-in have encouraged the industry's recent growth.
Terence Tam, UNSW alumnus and Managing Director and Founder of Reflow Hub, started his own company, positioned as a global B2B marketplace for mobile device returns, buyback and trade-ins.
"At Reflow Hub, we manage the marketplace for used mobile phones in the B2B space. What that means is we essentially buy from vendor partners such as telecommunications (telco) companies, insurance providers, and wholesalers," Terence says.
"We help telco companies dispose of used mobile phones. Once they reach a particular number – say 1,000 units of damaged mobile phones, they need to offload for cost recovery and that's where we come in."
Reflow Hub is a post-sale online business targeting international markets, with Asia and the United States as key audiences. The company is today valued at $61 million.
"To be in this business, you need to manage a large number of units and adhere to trade compliance such as moving lithium batteries across borders. We are not just matching buyers with sellers like on Gumtree or eBay – we facilitate transactions by making payments, managing the cash flow, insurance as well as logistics and currency risks," Terence says.
How did it all start?
Terence single-handedly started Reflow Hub in 2017. The team has since grown to Hong Kong and has a headcount of ten people.
As the United States (US), Europe and Asia are the main markets for second-hand mobile phones, Terence decided to base the business in Hong Kong to be closer to buyers and suppliers.
"We are based in Australia and we started the idea in Australia. But the market size of second-hand mobile phones is much bigger in the US and Europe. A lot of the inventory comes out of the US, so Hong Kong is a great landing spot for that. Hong Kong is also classified a special economic zone and does not have GST or import tax.
"So, whatever happens logistically or physically will have to go through Hong Kong and get redistributed or processed before it goes to its new home," Terence says.
It also really comes down to the types of devices they handle at any particular time.
"When we handle devices that we call grade C, grade D, grade E and beyond, they are generally in a very bad condition. They require a lot of work to get back to a quality that a consumer would want."
Most of these supply chains are based in Asia and that's where the technical abilities lie as well.
"In terms of spare parts required to make the mobile phones functional again, we need to explore channels in Hong Kong, China and Singapore for repairs. So being located in Hong Kong is more cost-effective logistically."
What is the inspiration behind Reflow Hub?
Terence began his entrepreneurial journey with Meredo, an inventory management company he founded as a student at UNSW.
"I decided to start my own business as a hobby when I was still studying. I opened Meredo in 2009 and it provided upstream inventory management solutions to manufacturers, distributors and retail chains for consumer electronics products such as mobile handsets and DSLR cameras."
Terence built traction in the inventory liquidation space through Meredo.
"I essentially financed the supply chain for smaller retailers who were selling computer parts and mobile phones and they would then buy products from distributors."
Unfortunately, as the products were not fast moving, Terence was not able to reclaim his capital.
"My cycle rates were very, very low," he says.
Having his capital locked up to specific units, Terence started selling the items on eBay in an attempt to liquidate. It was then that he uncovered a huge market overseas for mobile phones.
Globalisation made tech products more accessible
eBay and the start of globalisation enabled Terence to find a niche market in consumer electronics in Hong Kong, Singapore and Malaysia. Over the years, the demand for slow moving products grew and Terence approached retailers such as Dick Smith, JB Hi-Fi, Bing Lee, and Harvey Norman to buy slow inventory that was not selling.
"I built a very niche business in liquidation by helping businesses clear end-of-line products or products that are redundant," Terence says.
The fast pace of technology and annual new product releases (think iPhone 12 coming out in the next few months) prompted Terence to adapt his business model to consumers who are more price conscious and as influenced by the latest technology trend.
"One of the things that I realised is that the average price of used mobile phones kept increasing. The mobile phone industry has also reached its peak saturation. Everyone has a mobile phone or two. So, consumers are more comfortable with the idea of buying a refurbished or second-hand phone at a better price," he says.
How competition is changing the telco industry
There is no doubt that the introduction of buyback and upgrade programs has encouraged telco carriers to fight for customer retention rather than customer acquisition.
"The focus has shifted inwards and their aim is to retain customers. They want to continue monetising their existing customer base and this is why they have so many add-ons such as sports and Netflix subscriptions to ensure they are catering to their customers' every need."
Terence explains that telco companies have realised it is very expensive to run marketing campaigns to only end up trading customer bases or segments of their customer base with one another.
"Everyone has a mobile phone, and everyone has mobile data. This makes it very competitive for telco companies to differentiate themselves."
Terence is ranked #2 on Australian Financial Review's Fast Starters 2020 and graduated from UNSW Business School with a Bachelor of Economics.