There are two basic ways to do business as a used device reseller, with a few variations. Regardless of which way your wholesale cell phone business is structured, it all boils down to the profit margin you can make versus your costs in terms of depreciation and time.
Here, we will take a look at the two major tracks your business can take, and the pros, cons, and keys to success for each one.
1. Flipping phones
This is all about buying low and selling high, as fast as possible. This method means you won’t spend any time grading phones, or repairing or adding value to them. You’ll buy as low as you can, then turn the inventory at a profit as fast as you can.
- You can convert your inventory into cash fast. This allows you to restock quickly and do it again. This strategy will also insulate you from market price drops that can occur between the time you buy and sell.
- There is little processing for you to do. All your costs – fixed and variable – will be lower.
- You must be able to buy low enough to make a decent profit. Because you aren’t adding any value to the phones, your gross margins will be lower. This makes inventory turns even more important, because cell phones lose value.
To pursue a flipping phones strategy, it’s critical that you know exactly what you’re getting. Your biggest priority should be finding a distributor with a reliable cell phone grading system.
2. Adding value
This strategy involves more time and cost than flipping phones – and it also generally means higher prices. When you add value as part of your wholesale business, there’s a range of actions you can take including:
- Simply regrading phones to be more specific and transparent
- Upgrading phones, which can range from minor fixes like light repairs or replacing screens, to fully refurbishing phones back to carrier standards so that they look or function better
- You can make considerably more margin on the device.
The key is finding wholesale cell phone distributors with a grading system that lets you know the exact condition of the phone when you are purchasing it. If you are regrading, you need to understand the grading breakout (for example, 40% Grade B, 40% Grade C, 20% Grade A, etc) before you buy phones, so you can price and sell them at a profit.
If you are repairing or upgrading phones, it’s also critical to know what you’re getting so you understand the cost, time, and pricing involved.
- It takes time to regrade, repair, and refurbish phones. Because of that, there is a chance that the phone will drop in value before you finish processing it. Regrading is faster, and refurbishing takes more time, but you will always have to balance time and price to make sure your margin is high enough to justify the cost and the risk in terms of time and depreciation.
- You may get phones that you can’t bring up to a better standard or that cost too much to repair. That’s why it’s critical to find a supplier with a reliable grading system where you can buy wholesale cell phones and know exactly what type of repairs they are likely to need. Then you can more accurately forecast how much money and time you will need to spend to repair the phone or make it like new again.
- All your variable costs (testing, grading, repairing) will be more.
For any business strategy you choose for your wholesale operation, you will always need to balance the margins you can make with your costs, risks, and time involved in reselling the phones.