The Reverse Value Chain: A Smartphone Story

I was recently on FaceTime with a friend of mine, catching each other up about how our weeks had gone with technology that, until recently, would make our conversation appear to be from a Star Trek scene. With my small rectangular screen in hand, and his small rectangular screen in his, we were able to communicate across the continental United States with no delay, and see each other’s reactions in real time. It’s one thing to hear a familiar voice on the phone, a whole other to see a friendly smile. About ten minutes into our call, my screen turned purple, with thin black and blue vertical lines now covering my friend’s face and mine. At first, I thought I’d accidentally selected a new filter, and that perhaps a new Matrix movie was being promoted. My friend saw it too, and remarked about how my face, but not his, had turned purple and lined on his screen as well. I ended the call and opened my camera app, soon to realize that the sci-fi movie explanation my pop culture-saturated brain initially offered was incorrect. My front-facing camera had burned out, overheated by the demands of the once-futuristic technology.

This was a surprising development, as I’d been on FaceTime calls much longer than this one and my phone was less than a year old, with no obvious signs of wear and tear or obsolescence. The next day, I contacted my wireless carrier and explained the situation, to which the customer service representative offered to replace the phone that still felt quite new to me. “That sounds great,” I replied, “but how long until I receive my replacement? Would it be faster for me to visit a store?”. “We can get it to you tomorrow, we’ll overnight it at no extra charge,” he assured. For not a penny out of my pocket, with the phone still within the warranty timeframe, I had a replacement in hand less than 48 hours after the malfunction. I was given 5 days to transfer my data from my old phone to my new one and ship the old phone back in the reusable, prepaid box the new one came in. Though my new phone wasn’t quite new, instead refurbished, you couldn’t tell the difference beyond a fully functioning front-facing camera. As a customer, this process was much easier than I anticipated, and while I was fortunate to have the problem occur within the warranty window, it got me thinking about all the steps required to get a new phone to me, and my old phone to a refurbishing facility. In each of these steps, my wireless carrier created an opportunity to extract value from a faulty product, minimizing their losses and improving customer relationships.

Enhancing Customer Satisfaction and Loyalty

By being accommodating to customers, wireless carriers can use the returns process as a means by which to strengthen brand loyalty and appreciation. No one is excited to need to exchange their device, and many customers often feel frustrated while having to explain and justify the necessity of their return. Making this evaluation process as hassle-free as possible turns an annoying situation, from the customer perspective, into one of relief. We’ve already explored the importance of clarity in fostering happy and loyal customers, specifically in regards to shipment visibility, and that same principle applies here. By putting less work and stress on the customer, they’re more likely to reward companies with continued business, not to mention potential referrals. Providing a solution to the headache of a damaged device essential to daily life, such as a cell phone, offers up long-term benefits and revenue opportunities for wireless carriers that justify the short-term shipping and processing costs incurred. This is especially notable when considering how much more expensive customer acquisition tends to be than retention, highlighting the value of an easy and expedited customer service claims process.

Remanufacturing

Perhaps the greatest value recovery opportunity in the reverse supply chain for smartphones is that of remanufacturing, in this case most often refurbishment. For many users, the issue prompting them to exchange their phone in the first place is singular, and remedied by simply swapping a faulty part for a functional one. Wear and tear can also be alleviated with hardware replacements, be it an accumulation of scuffs and scratches on the enclosure, or one drop too many that shatters the display. Among the most common complaints by users is declining battery life, to be expected from most lithium-ion batteries after extended use, which is a relatively straightforward fix for remanufacturers, just a matter of battery replacement.

Even if a phone demands more than the typical minor repairs listed above, it still provides the opportunity for resale, and substantial recovery of value. Instead of turning a damaged or faulty product into nothing more than a write-off, companies can utilize a second sale to minimize their losses, or potentially still turn a profit.

Environmental Benefits

In my case, my damaged phone traveled across the United States in less than 2 days to undergo inspection and processing, and my new phone arrived at my doorstep from a warehouse some 400 miles away in less than 24 hours. This may prompt some environmental concerns, particularly about the carbon footprint of such expedited shipping on both legs of the exchange. You might be surprised to hear just how much better refurbished phones are in terms of sustainability than new ones, especially given this logistics context. A French study found that the annual environmental impact of a refurbished smartphone purchase is 77-91% lower than that of a new smartphone. Much of this has to do with the reduced demand for raw material extraction, given the utilization of existing components in remanufacturing. Crucially, the study also concluded that the environmental benefits of refurbishment hold strong even when the actual refurbishment process takes place abroad, addressing concerns about logistics emissions, even if local repairs remain ideal. It’s worth noting scrap opportunities in this conversation as well. Phones that are too badly damaged for repair can still prove useful, as companies can recover some value from dysfunctional devices and lower their environmental impact by making use of the materials already in their possession. Solutions such as these, which provide both business and environmental benefits, will only become more important as climate concerns persist and rise in the coming years.

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