RETAIL ENVIRONMENT
Ringing in the changes
By John Wilson, Executive Editor
Nothing epitomises our everyday engagement with the modern world more than the love-hate relationship we enjoy or endure with our mobile devices. So ubiquitous is our relationship with mobile technology that we live our lives both literally and vicariously through the over-bright screens of phones, tablets, and laptops connected 24/7 to the Internet.
Almost every human interaction is seen through the prism of the emotional and financial transactions we engage in on a daily basis, from multi-media photography and video to email and texting, banking and payments, ticketing, access control, and even our single-swipe love lives. In addition, this tripartite coexistence of distraction, transaction, and attraction further compels us to share and overshare every minute detail of our daily existence through billions of social media outpourings.
We are a world in denial about our addiction to small devices, a reality we only recognise when we realise we have lost our phones and the dreaded FOMO (fear of missing out) takes hold like cold turkey for an addict trying to kick a drug habit. The absence of a phone for millions of people is like the loss of a limb triggering anxiety for "users" who may have been victims of crime or simply and carelessly left it on a train, plane, or in a coffee shop offering free Wi-Fi.
According to insurers who receive hundreds of thousands of claims for lost mobile devices every year, although theft is an obvious explanation, it usually only represents 20 per cent of claims, with another 20 per cent representing the grey area of "it might have been stolen" or "I had it when I left the house" or "I think it was a pickpocket as I remember this guy who bumped into me." The remaining 60 per cent of claims are simply unaccounted for, which is hardly surprising when the churn created by constant upgrades and marketing ploys that encourage network promiscuity mean that billions of devices are on the move every day.
The retail sector itself can be seen as a generator of the loss it tries to prevent with often leaky return or reverse logistics processes as a result of the focus on sales. Fragmented and fractured supply chains operated by often unvetted seasonal warehouse personnel or agency drivers who help themselves to the merchandise entrusted to them means that valuable mobile devices end up in the resale market. Those that eventually turn up in another distribution centre as a result of a returned online purchase, or in lost-property departments, are often eventually sold on to third parties for resale, having never realised their retail value.
For the hundreds of millions of mobile devices that end up in landfill every year, there are believed to be more than 125 million UK phones abandoned and languishing unused in domestic drawers, the equivalent of four for every phone in use in the country. According to a recent report by the US Environmental Protection Agency (EPA), every day we get rid of over 416,000 mobile devices and 142,000 computers either by recycling or disposing of them in landfills and incinerators. According to a BBC Panorama programme, 20 to 50 million tonnes of e-waste is generated worldwide every year. With today's focus on climate emergency around the world, there is little or no appetite for dumping phones into landfill with the potential for a toxic cocktail of heavy metals seeping into the soil and water tables creating a future environmental timebomb.
Historically, a principal driver of smartphone sales growth was upgrades. In 2012, according to Deloitte's research, just over half of adults aged eighteen to seventy-five had a smartphone. Now 87 per cent have one. A mere 8 per cent of respondents remain using solely a basic mobile phone, and some of these may refrain from upgrading out of principle.
A further factor is the surge, in recent years, in SIM-only contracts in the UK. Pre-pay users have opted to move to monthly payments. Some who were previously on bundled contracts have chosen an airtime-only contracts with operators. SIM-only implicitly severs the link between operator contract renewals and handset upgrades. A decade ago, new smartphones were typically bundled with a two-year airtime contract, leading to a predictable rhythm of biennial smartphone upgrades. A third of smartphone owners are now on SIM-only contracts compared to only 19 per cent in 2015, enabling users to upgrade their airtime without upgrading their phones.
The rise of SIM-only is contributing to the slowing of the smartphone replacement cycle. Overall, smartphone owners in the UK are holding onto their phones ever longer. In this year's Deloitte survey, 59 per cent of smartphone owners had acquired their devices in the prior eighteen months. In 2017, the proportion was 62 per cent; in 2016 it was 66 per cent.
Rise of the Second-Hand Market
A further constraint on sales of new phones has been the continuing growth in second-hand smartphones. In 2018, used or refurbished smartphones accounted for 15 per cent of the smartphone base in the UK, a two-percentage-point rise over the prior year. With every year, the second-hand smartphone market becomes more professionalised. The market has migrated from personal ads in online marketplaces to high street stores. Used phones are now available graded, boxed, and warrantied. The lack of visual differentiation between different generations of smartphone may also encourage some people to settle for a three-year-old, second-hand smartphone rather than a brand new one. Some may trade off a larger SIM-only data plan for an older model of phone. And the cycle of hand-me-downs between generations of family and friends continues.
Equally, these coveted devices are stolen, lost, or find their way into the wrong hands so that the owner's data is at risk of compromise. With price points of £1,000-plus for the latest iPhone 11 and the Android models in hot pursuit, Samsung, Huawei, and Google all offer models priced at the equivalent of over £700, desirability continues unabated, making the latest devices targets of crime from organised gangs steaming stores and literally ripping the phones from the stands in brazen daylight attacks or through moped-assisted attacks in major cities such as London.
Many of these store raids are to break the phones down for their components, but equally, they are finding their way into the burgeoning second-hand market, which research from Persistence Marketing Research (PMR) forecasts will be worth almost $40 billion (€36 billion) in 2025, double the revenue generated in 2017. PMR estimates the global refurbished and used mobile phone market will expand by 8.9 per cent during this eight-year period and also projects that "sales of refurbished and used mobile phones in company-owned and consumer-owned markets will collectively account for 277 million units by the end of 2025."
Austerity has been a driver, and consumers realised they can turn old phones into cash with many of the out-of-contract smartphones that have been languishing in drawers now more likely to be redeemed for hundreds of pounds. The growth explosion has also been buoyed by consumers holding onto handsets for longer or, in many cases, purchasing used and reconditioned phones. This market has been further driven by a slowing in the functionality development of new smartphones.
Consumer technology analyst Zach Emmanuel said, "Consumers think the latest top smartphones are out of their price range and are less likely to upgrade their devices because of it. Manufacturers are aiming to offer better innovation and value for money through improved cameras, for example. They will also be hoping 5G can help to boost the market."
So cash-strapped consumers are looking to the "pre-loved" market to get high-quality reconditioned phones with SIM-only deals at a fraction of the cost of the monthly network contracts that come with a brand-new phone. This growing trend towards the second-hand market has its inherent risks in terms of caveat emptor - "let the buyer beware." For how do buyers know that the phones they are buying online or through electronics exchange stores (latter-day pawnbrokers) are not stolen? For the seller, too, how can they protect their reputation as legitimate resellers so that the confidence and trust that underlines their market is left intact?
The industry has had a poor press with many stores seen as "fences" for stolen items, but the perfect confluence of austerity and the slowing in technological advances has driven the market along with a growing respectability, which has been achieved through greater technological developments and reputational protections.
MobiCode
Two of the UK's biggest mobile phone resellers, CEX and Game, both use MobiCode, an established and highly regarded provider of recycling management solutions for the pre-owned mobile industry. MobiCode offers its users a simple-to-use suite of solutions developed by mobile phone industry experts to simplify and lower the cost of risks in the phone recycling market and to protect their brands from the fence accusations. MobiCode is also the only technology on the market with the power to block or blacklist stolen phones identified through the international mobile equipment identity (IMEI) number to protect consumers across the globe.
With over 25,000 users protecting millions of devices to date, MobiCode works with insurance companies, recyclers, network operators, and law enforcement through the sharing of data to reduce fraud. It achieves this for the reuse and insurance markets by identifying bogus claimants through the IMEI and serial numbers, which informs the recycler store or insurance company at the point of sale or claim and helps networks through MobiCHECK instant alerts when someone attempts to sell a stolen phone.
Law enforcement taps into the technology to acquire critical data for evidence to build criminal convictions against those attempting to sell stolen phones or make bogus insurance claims. So far more than 350 officers regularly access the GDPR compliant MobiCHECK which, through alerts, also integrates with CCTV evidence at a store's point-of-sale where suspicious transactions are being made. The technology checks, tests, and wipes the devices, a legal requirement for data protection and the future refurbishment of mobile phones and tablets.
"Data is a commodity in today's world, and we see phones that have got really personal images on, which cannot be left on a phone if it is to be resold," said Peter Kirby, chief executive officer of MobiCode, a pioneer in the mobile phone industry who founded the business in 2011. This is where the business deploys MobiWIPE as part of the transaction process to restore the phone to its factory settings, ready for resale.
Stores such as CEX and Game use the MobiOne interface, a multi-device technology that is designed to be simple to use and provides the ability to increase transaction workflows at the point-of-sale when a device is brought in for a cash exchange. During the course of the brief transaction, the phone is run through MobiCHECK, which identifies the provenance and legitimacy of the device in seconds so as not to disrupt the customer experience.
Gavin Nunney, risk and loss prevention manager for Game, said, "It is a really great solution in being able to check the history of a phone as it flags any details we need to be aware of, such as any outstanding insurance claims on the phone, which would indicate that it had been reported missing or lost. If it comes back with a query, we can simply decline the transaction. It is also great that the technology has the ability to lock phones anywhere in the world from the UK, and the data helps with our civil recovery claims as well. I think this technology has huge potential for retailers like us but also for the networks and the logistics industry. If a phone goes missing or is stolen in the supply chain and ends up in one of our stores, the IMEI number flags it."
Sam Millen, head of loss prevention for CEX, said, "The buying of reconditioned phones is a growing market. We are seeing more and more people coming through our doors. We have worked with MobiCode to help develop this product because it has helped us from an industry reputational point of view. We can see the history of the phones, so we prevent stolen merchandise entering our stores.
"We now use it all over Europe, and we have built great relationships with law enforcement, including Interpol, off the back of it because of the data that it provides. It has been able to solve countless crimes and open doors for this level of engagement with other retailers, such as Game. We have built good contacts with other major brands as well because of the ability to be able to deter at the point-of-sale and our strong relationships with Police. In short, it has helped enhance our relationship in what is a £1 billion industry that is also helping local economies because of the amount of cash being generated from legitimate sales while at the same time preventing fraudulent or criminal ones."
MobiCode is now also developing an app that will be deployed to trace counterfeit handsets originating from the Far East, an issue that could become a major brand-damage concern as the UK's relationship with Europe changes as a result of Brexit.
"We will be able to tell a genuine phone from a fake in less than a second using the app," said Peter Kirby who is also working on a "gamification" app with the insurance industry to encourage more people to take out insurance to protect their phones. "All of these projects help keep phones in circulation longer and out of landfill, which is better for the planet. MobiCode is encouraging and facilitating the recycling gold rush by providing the picks and shovels to be able to make it happen."
Thirty Seconds to Found
Stolen phones are one issue, but as discussed earlier, as much as 60 per cent of unaccounted phone loss is simply down to loss, many of which end up in lost property departments of railways, airports, and the broad array of hospitality outlets. Another emerging trend is the technology facilitating repatriation of lost phones as yet another method of keeping e-waste out of landfill.
MobiCode has a working relationship with Zero Burden Services (ZBS), the online listing of missing items founded in 2000 and holder of the Police's coveted Secured by Design accreditation. All found phones go through MobiCode to determine their provenance and whether they are genuinely lost, stolen, or subject to an insurance claim, in which case the technology will block the phone from use. At this point, the phones are also wiped for GDPR purposes, ahead of entering the resale market if they cannot be repatriated after the three-month period of them not being claimed. Proceeds of that sale are then shared between ZBS, the lost property office operator, and MobiCode. But the unique proposition of ZBS, an easy-to-search database, is the repatriation rates of lost items.
"Repatriation is the sole focus of our business," said Nick Ellenden, a partner of ZBS, which has a success rate of 67 per cent compared to the industry average of between 9 and 13 per cent. "Imagine losing a phone or a laptop with sensitive information on it. If it's a work computer or phone or just your own data, it can have huge implications, not to mention the potential for brand damage to the organisation," added Nick who was alluding to stories of Government laptops that have been left on trains. Such instances today also carry punitive fines from the Information Commissioner's Office (ICO), which has claimed hundreds of thousands of pounds from Government departments and local authorities for lapses in security when unencrypted devices have been left on trains.
Nick continued, "We live in times when we are all in a hurry, and we put our phone on charge on the train and forget to unplug it. Or we put our tablet down on the seat next to us, but don't pick it up. Thankfully, we throw nothing away, whether it's a mobile phone or a pair of glasses. Everything has a value, with glasses going to charities, and clothes that are not claimed go into shredding which can be reused."
Working with rail operators, airlines, hotels, and law enforcement, including British Transport Police, the objective of the business is to get all lawfully mislaid property back to its owner. "We see everything, including rucksacks containing drugs or weapons, which we obviously pass through to law enforcement as we are obliged to do. We model the service on the maxim "where lost is found." If we log it, there is less chance that you have lost it," Nick said.
Loss prevention is a self-explanatory term for trying to avoid the loss in the first instance, but many businesses are more geared towards profit protection, a more descriptive term for the avoidance of the financial damage or brand damage associated with theft, fraud, and general dishonesty. Mobile phone loss is an occupational and personal hazard of an industry that occupies the axion of desirability, portability, profitability, and disposability. In an increasingly competitive market, the industry is ringing in the changes by looking ahead and moving towards extending the lifecycle of phones and tablets by increasing the ability to repair, recycle, repatriate, or resell while at the same time denying the ticking timebomb of a long-term lithium battery's long-term landfill damage.
