BackMarket held a press conference in Paris on Thursday morning to talk about upcoming product launches and provide an update on the company's current situation. For those of you who may not be familiar with this French startup, it operates a marketplace for refurbished electronics (mostly smartphones). The company has attracted a lot of investor funding in recent years, but it has also been through some tough times.
Like many big tech companies in 2021, Back Market has been riding the wave of zero interest rates around the world to raise huge amounts of funding: a $335 million Series D round, followed just a few months later by another $510 million in a Series E round.
After reaching a $5.7 billion valuation, backed by a realization that the economy was slowing, the company implemented small job cuts in the second half of 2022, telling French newspaper Les Echos that it was “the best way to achieve profitability in the coming years.”
Returning to the press conference on Thursday, the company was keen to tout its renewed focus on product launches and new projects. Back Market said it wanted to find new distribution channels and push premiumisation so more people would consider buying refurbished products instead of new.
Find where your customers are already
Over the past decade, Back Market has not only captured a significant portion of the used electronics market, but also expanded the market for refurbished smartphones. The pitch is simple: refurbished devices are cheaper than new and better for the planet. Plus, when it comes to smartphones, it's becoming much harder to define why this year's model is better than last year's. So why shell out a ton of money to buy a new one just for a minor upgrade?
The company doesn't sell smartphones or other electronics directly, but partners with 1,800 companies that repair and resell old gadgets — essentially a professional services marketplace. Since its founding, the company has sold 30 million refurbished devices to 15 million customers.
Most of BackMarket's customers buy their devices through its website or mobile app, but the company realizes it can be constrained by its partners' inventory, so it wants to expand demand and supply through strategic partnerships.
For example, the company has partnered with Sony on the PlayStation console. “A lot of people come to the back market looking to buy a PlayStation,” says co-founder and CEO Thibaud Hug de Larauze. But the problem is that the back market is constrained when it comes to supplying these types of devices.
While many people think about trading in their smartphones, few think about selling their old gaming consoles. “With the partnership between Sony and PlayStation, we are the only partner that allows trade-ins on any PlayStation within Sony's website, the Sony PlayStation Store,” he noted.
As a result, anyone buying a new PlayStation can get a trade-in discount at checkout, and Back Market never has to go out of stock on older PlayStation consoles. This is a great example of what Back Market is thinking about with future partnerships.
Image credit: Romain Dillet / TechCrunch
“This is the first [partnerships of this kind] “But we want to bring this service to every place where our customers actually buy new technology, wherever they are to get their old technology and to serve people who want access to refurbished technology,” Hug de Larauz added.
Trade-ins are already pretty common when it comes to smartphones, but customers who visit a mobile phone store usually wind up buying a new device along with a long-term plan.
BackMarket plans to partner with telecom companies to allow customers to buy refurbished devices at a discount in exchange for long-term plans. Its first two partners are France's Bouygues Telecom and Visible, a subsidiary of Verizon Wireless in the United States.
New premium tier with official parts
Quality remains a major concern when buying refurbished products. Not only does the company allow returns, but it also constantly tracks the percentage of defective products on its platform and tries to reduce that number. Currently, Back Market has a 4% defect rate, which means that 1 in 25 phones doesn't work as expected in some way.
When customers buy smartphones on the back market, they can choose between devices in fair, good or excellent condition, and the company is now introducing a new top-tier class called “Premium.”
The main difference between a brand new smartphone and a premium refurbished device is that the premium device is certified by Back Market to have been repaired using only official parts.
In addition to this new premium tier, Back Market is working on updates to make the app a smartphone companion: when you register your phone with your Back Market account, you'll receive tips to keep your device in good condition for longer; and we're also working on gamification features like badges and rewards.
Similarly, BackMarket will make it easy to check the value of your current phone. “Just open the BackMarket app, shake your phone, and it'll tell you the value,” explained Amandine Duru, chief product officer. The feature is expected to be released around Black Friday.
Finally, Back Market uses generative AI to make browsing the catalog easier. It can be difficult to compare two smartphone models and decide which one is right for you. In the coming months, when you select two smartphones, you will be presented with an AI-generated summary of how the two models compare.
European profitability this year
When considering growth potential, Backmarket said rather than focusing on the smartphone industry, it is taking inspiration from the automotive industry.
“Today, nine out of 10 people buy used cars,” says Hug de Larauz, “and everything is made and organized for that purpose. Spare parts are available to everyone, and you don't have to repair the car where you buy it.”
Similarly, the repairability of smartphones and spare parts is also about to change, starting with the European Union: by June 2025, manufacturers will be forced to sell spare parts to individuals and businesses who want to repair their devices themselves.
The shift to refurbished devices is also already well underway in Europe. “Backmarket is on track to be the first in Europe to be profitable in 2024,” Hug de Larauz said. “This is a big milestone for us, because from the time we founded the company until very recently, we were labeled as, 'OK, this is an impact company.' Impact means good feelings, but the money isn't there.
“Not really. In fact, we're making a profit,” he added. Now, let's see if the bag market becomes a destination for refurbished goods in more countries, starting with the U.S.
Image credit: Romain Dillet / TechCrunch
Source link