Wholesale cell phone distributors have variable profit margins shaped by their buying and selling strategies.
On the buying side, factors such as the models of phone the wholesaler targets (flagship, mid-tier, or budget), the grade/condition of the phone, and the repair or refurbishment costs (if any), combine to establish a price target the wholesaler strives to hit to make enough profit.
On the selling side, the market price of a resold phone will vary based on whether the buyer is a wholesale or retail outlet, whether the phone is sold online (more competitive, and requires shipping) or locally (highest prices, but more limited demand), and whether the wholesaler is using a marketplace with fees.
Despite the different factors that affect a wholesale cell phone distributor’s profit, there are some general industry-wide ranges for profit margins.
- Phone flippers who sell to other wholesalers without providing value-added services typically make a profit margin between 2 percent and 5 percent.
- Value-added resellers who increase the quality of their phone stock through light repairs, testing, and/or careful regrading, make average profit margins of between 5 percent and 7 percent, but can make as much as 10 percent to 12 percent with skill.
- Resellers who refurbish or reprogram phones back to manufacturer standards can make as much as 25 percent profit with the right buyers.
Phone flippers are characterized by a focus on high volume, amassing and turning over phone inventory with the greatest possible speed. They avoid spending time on phone grading and repairs, and do the minimum required when creating listings for their phones.
Because phone flippers move inventory at high speed, they are insulated from depreciation. Their speed also means that they quickly and repeatedly convert their phone stock into cash, which they can then use to purchase more phones.
Flipping phones is a rapid-fire, high-volume game with low profit margins to match. Success depends on finding a steady source of well-graded wholesale cell phones, so you will know exactly what you are getting and how to price your phones.
Value-added resellers enjoy higher profit margins than phone flippers because they make a greater contribution to the quality of the phone. They can do this in several ways.
- The simplest method of adding value is to create better listings for phones. The exact components of a good listing will vary by the marketplace, but they all require good quality photos and detailed, accurate product information.
- The next level up in the value-add game is to grade the phones, by carefully testing and examining the device according to the reseller’s standards, which can include functionality testing and cosmetic grading.
- Beyond grading, resellers can add value by making light repairs, such as replacing cracked screens.
Remanufacturers or Reprogrammers
The ultimate level of adding value is to perform remanufacturing or reprogramming that restores phones to manufacturer’s specifications. Here, resellers can earn up to 25 percent profit if they choose the right buyers, like carrier-certified pre-owned (CPO) programs, insurance companies, retailers, and businesses that need phones for their workforces. No matter how much value resellers add, it’s essential that they have a dependable supply of wholesale devices.
Profit margins in the wholesale cell phone business are shaped by many factors, most of which are under the control of the reseller. The decisions resellers make about what devices to stock, what grades to target, whether to regrade, whether to repair, and what type of business or marketplace to sell to, all determine the profit margin the reseller will make.
Like most business decisions, all choices come with trade-offs. If you sell to other wholesalers, margins will be low but they will be offset by high volume. If you go direct to the customer via a retail store, you’ll sell at higher prices but also bear more inventory risk. And if you sell to online marketplaces, you may quickly find buyers, but you’ll have to cover shipping and transaction fees.
There is no single perfect strategy for the wholesale cell phone business. Whether you choose to be a high-volume phone flipper or a value-added reseller, margins are low and the marketplace is highly competitive. To earn the best possible profit, consider your skills, risk preferences, and available capital, and choose your preferred mix of risk and reward.