Edition 95
View from Academia
by Mark Ferguson, Guangzhi Shang, and Michael Galbreth , , Univ of South Carolina,Florida State Univ, Univ of Tennessee

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Smartphones are well-known for having a relatively short “use phase,” i.e. time between purchase and eventual disposal, which has been estimated by some at less than two years. This frequent replacement cycle of smartphones generates a tremendous volume of reverse flows. Anecdotally, it is often suggested that smartphone replacements could be slowed by improving their repairability/upgradability, which would enable users to keep up with technological innovations without replacing their smartphones. However, there is also evidence that innovation does not drive the replacement decision, with users seemingly anxious to justify smartphone upgrades based on minor technical issues or even cosmetic imperfections. From both an economic and an environmental perspective, there are benefits to be gained from extending the smartphone use phase, but at this point it is unclear how best to convince consumers to keep their phones longer.

Several interesting insights into this important issue are presented in a recent study, forthcoming in the Journal of Industrial Ecology, by Tamar Makov of Yale University and her coauthors. Using data from eBay, the authors examined the sales of nearly half a million used Apple and Samsung smartphone listings in 2015 and 2016. Their analysis of the data revealed that repairability had a very limited impact on the use phase of smartphones. They also investigated another logical driver of longer use phases, the memory size of the smartphone, finding again that the linkage was minimal. In contrast, value depreciation in smartphones seems to be comparable in some ways to the automobile industry, in which secondary market value is more tightly linked to brand quality than to the actual durability of the car. In other words, smartphones appear to display the substantial “nonfunctional utility” common in luxury brands. Makov and her coauthors find that a strong brand can lead to a 1-year increase in the economic life span of a smartphone. Their insights suggest that, in the effort to reduce the upgrade cycle of smartphones, brand equity and the role of premium smartphones as conspicuous consumption are important considerations.

The above is a summary and commentary based on:
Makov, T., Fishman, T., Chertow, M.R., and Blass, V. (2018) “What Affects the Secondhand Value of Smartphones: Evidence from eBay” Journal of Industrial Ecology, doi:10.1111/jiec.12806
Click here to access the full manuscript: https://onlinelibrary.wiley.com/doi/epdf/10.1111/jiec.12806?author_access_token=FzxHJ2LKY6puC5kBRmnkZota6bR2k8jH0KrdpFOxC66NpWvIcjHLyAhrkJVu5PYOHG6Ukq5exvgbpO3loiJVR8xXFT13uejm1rQcEbfX33QYk_4oXeBpnJjAPZWyZway
RLM
This recurring series provides plain-English summaries of leading academic research in the area of consumer returns. It is co-produced by Mark Ferguson (Univ. of South Carolina), Michael Galbreth (Univ. of Tennessee), and Guangzhi Shang (Florida State Univ.).

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