Starting a phone reselling business involves committing capital, taking risk, and setting up new operational systems, but you don’t have to do it on your own. WeSellCellular has helpful resources for every aspect of the phone reselling business. These eight sections (with links to more details) can help you determine your reselling path.
1. Do your research and set a solid foundation
When starting a business, it’s critical that you determine the best legal structure for your venture. In the US, businesses can be sole proprietorships, LLCs, S corps, and C corps. Which of these structures is best for a phone reseller? That depends on several things, including how you want to run your business, whether you will have partners, the level of liability protection you want, and whether you intend to sell the business later.
Consult a business attorney and a tax and accounting professional to understand:
- The costs and benefits of the various types of businesses you can form
- The tax and accounting implications of the different structures
- What documentation will be required to start the business
One detail to understand up front is resale certificates. A resale tax certificate indicates that you are a registered reseller and will be collecting sales tax from your buyers, but need not pay sales tax yourself. Resale certificates are required by some jurisdictions, including most US states.
2. Define your niche
A phone reseller should have the needs of specific types of customers in mind when they stock inventory, and a strategy for reaching that kind of customer. The type of customer you target should be informed by your study of:
- Market demand: Who is in the market for a used phone, and what kind of phone do they want?
- Your go-to-market plan: How will you sell your devices – locally or nationwide, in a brick-and-mortar store or online?
A generic business that tries to be all things to all people is much harder to market than one with a clear customer profile. Examples of real niches may include recent iPhones sold to local middle-class buyers or mid-tier Android phones sold to emerging markets.
3. Figure out your business model
There are essentially two business models to choose between as a phone reseller: phone flipping or value-added sales.
- The phone flipper buys many phones as quickly as possible and resells them without processing, at slightly higher prices. If you focus on phone flipping, you’re in a high-volume, low-margin business with minimal overhead.
- Value-added resellers add value to the devices by re-grading them and sometimes making repairs. This type of business is more time-consuming and resource-intensive because you need employees, an office, and a warehouse, but it compensates with a higher profit margin.
4. Decide which types of phones/devices you will buy and sell
There are many tiers of phones available, from low-end Android phones, to mid-tier devices, to flagship-tier phones like the latest Pro-model iPhones. And you have the choice of buying these devices new or used.
New devices sell at the highest prices but also cost you more, so they tend to be lower margin than selling flagship used phones. Reselling used phones is more resource-intensive if you spend time and effort on sourcing and grading. Here’s what to look for when buying wholesale phones.
In the US, the most popular device manufacturers are Apple and Samsung. Their phones typically resell at higher prices than other manufacturers, such as Motorola, OnePlus, Google Pixel, and Xiaomi.
5. Understand the economics
As a new entrant to the phone reselling business, you should understand the cost structure and profit margins of a typical operation. You should become familiar with the average profit margins in the industry, and expect your business to fall into that range.
Research the market and test what prices the market will bear in your niche. It’s best to begin your purchasing with a strict budget for devices, and slowly expand your inventory when you’ve dialed in your margins and have solid expectations for what you’ll make per device sold.
6. Find the right supplier
As a reseller, the quality and quantity of your inventory is dependent on the wholesalers you do business with. It pays dividends to develop strong relationships with wholesalers, as they will become long-term partners you return to.
When choosing a wholesaler, strive to understand the device quality on offer, the full cost of transactions (such as shipping expenses), the level of grading and testing performed, and the return policies.
7. Consider distribution and marketing
Fortunately, marketing for the used cell phone business is pretty straightforward. If you’re selling online, you have the choice of creating listings on online marketplaces, such as Amazon or eBay, or devoting resources to your own website.
Listings are a quicker way to get started, but the competition is fierce and the margins are slim.
Selling from your own website means potentially higher margins, but you’ll have to earn traffic. That can be done via SEO, paid ads, and content creation.
Finally, be aware that markets around the world have different expectations for device quality.
8. Run your business strategically and efficiently
In business, there are two meta-strategies for making more money: increase the value of sales or decrease expenses. You should be pursuing both of these goals. You can increase sales by adding to the number of customers who find you (the function of marketing) or by increasing the average value of a sale (such as selling phones of a higher grade or at a higher mark-up).
On the expense side of the equation, take a hard look at your cost structure and see if there are expenses that can be trimmed or eliminated. For instance, do you need an office, or can you work from home? If you pay for warehouse space, can you find a cheaper warehouse? It pays to systematically examine your monthly costs and research alternatives for every substantial expense.