For much of last year, I was running a cell phone repair business at www.denveriphone.com (site down). My business plan was based around purchasing used cell phones, repairing them, and reselling them locally at online through eBay and similar sites. For a number of reasons which I’ll outline here, it’s simply not as great a market as it seems to those on the outside looking in.
1. Every time you buy a used cell phone, it’s a bit of a gamble!
See how most arrows point to “don’t buy it?” That pretty much sums it up.
The current cell phone pricing structure that most people use to purchase their devices relies on a discount for maintaining a contract for a certain period of time. The agreement states essentially that you’re given a discount on the device in exchange for maintaining service for a specified period of time. If you stop paying on your contract, the phone is “bricked” making is useless for anything other than parts. Furthermore, it could even really be called a stolen phone, because the consumer violated the terms of the agreement. If I bought one of these phones which seemed legitimate at the time of purchase, then it became bricked, I couldn’t even pay the balance to the carrier if I wanted to. They will not allow anyone other than the customer to pay.
2. Or do you want to service a client’s own device while they wait?
If you make an error, you’re in big trouble. Lost data, a damaged device, irreparable parts? These costs add up quickly, and the good-will runs out as well. If you make an error in the repair, the client is without a cell phone when they were only dealing with a cracked glass display before. How often would you like to deal with this unpleasant quandary? How much capital can you invest in practicing repairs? I opted to purchase the devices outright and fix them on my own time.
3. Parts are of unreliable quality and samples always cost money!
If you have the investment capital to buy from a dozen suppliers and try out their products, then you’re fine, but if you’re relying on suppliers to send you quality you’re either paying a premium or gambling on online reviews. Once the parts have been installed, they’re not returnable or they may charge a restocking fee. To really know if the part works or not, you either need a tester (make your own) or you reassemble and test the phone and hope you get lucky. Either way, you’re now out parts cost, time, and potentially you have an angry impatient customer waiting to get their phone back. I ordered iPhone 5 screens from half a dozen suppliers and notice variation even from one lot to another. There were often noticeable differences in image quality and durability. The best parts with the largest margins come from China, but the shipping is unreliable and you’re either sending a lot of money to a stranger thousands of miles away with no safeguards or buying slowly and cautiously and spending too much time and cash on shipping fees.
4. The S-Curve: cell phone repair’s ship has already sailed
The people with the most profit potential were in the game in the infancy of the trade. Without the ability to capture market growth during the expansion phase, there’s little to sustain a venture during the mature phase. How does one capture market share in a fast-paced mature market with a myriad of trade secrets? Well, answer this question and you’ll do better in cell repair than I ever did!
The bottom line:
If you got in on the ground floor of the industry, operate a mobile operation and either provide perfect repairs with a stockpile of expensive parts bought up-front or can purchase devices efficiently with large enough volume to make it worth your time, then you’re in a great position. If not, keep looking for the right business opportunity.