As the world’s largest smartphone market, China is set to retire around 400 million smartphones per year. The precious metals found in smartphones make this an untapped gold mine for O2O gadget recycling businesses. Investors certainly seem to think so, with the online gadget recycling platform Aihuishou (爱回收, literally “love recycling” in English) receiving an RMB 400 million series D in December last year. While Youdemai (有得卖, literally “have for sale” in English) completed a RMB 120 million series B March this year.
Smartphone recycling is a lucrative business. Apple recovered over 61 billion tons of material for reuse in 2015, including 28 billion tons of steel, 6,612 tons of silver and 2,204 tons of gold, according to its Reuse & Recycling report. However, the challenge lies in getting consumers to actually recycle their old phones. A consumer report shows that less than 10% of consumers in China recycle their old phones. They either leave the phones sitting at home or throw them away.
This is where online gadget recycling platforms come in. They make it easy for customers to get rid of their old phones. Both Youdemai and Aihuishou have built powerful databases of common gadget models and strong partnerships with second-hand vendors and e-waste recycling companies. Customers only need to fill in a form, hit enter to see an estimated price, then select one of three ways for the old gadget to be collected (dropped off, picked up or posted).
The Jingdong-backed Aihuishou now boasts 20 million users who place a combined 200,000 orders for recycling per month. The company has also gone one step further by opening offline stores where customers can drop their devices off. The move has paid off as the offline stores now account for 50% of its revenue. Aihuishou expects to turn a profit in 2017, four years after it first started.
“When Aihuishou first started, a lot of people said [recycling] is really ‘low’ [referring to the low status of China’s junk sellers],” Aihuishou CEO Chen Xuefeng said in an interview (in Chinese). “But data tells us, the average transaction value on Aihuishou reaches RMB 1,000, which is higher than a lot of e-commerce platforms. As a business model, this industry isn’t ‘low’ at all.”