FOR Mercantile Pacific Asia, old devices are the new way forward. The Singapore-based distributor sees refurbished electronic products as a “sunrise industry”, particularly as the ascent of the circular economy promotes second-hand consumption.
“Our vision is to create a sustainable future by providing high-quality refurbished technology products,” said the group’s chief executive officer Kunal Narula. This year, Mercantile became an Enterprise 50 Awards winner for the fourth time, taking third place.
The group was founded in 1988 as a trading business of electronic devices. Back then, global supply chains were not fully established and mobile phone manufacturers had to rely on large traders to distribute their products.
Now, Mercantile has evolved into a provider of “device life-cycle management”, going beyond distribution to provide grading, certification and refurbishment services.
Over the years, the company has continuously adapted its strategies to keep pace with the rapidly changing technology landscape. When smartphones began to replace basic cellular phones, Mercantile saw an opportunity in shifting its focus to refurbished devices.
This is because the new smartphones have longer lifespans of about five years, compared with two years for their predecessors. As a result, manufacturers and telcos around the world have a reason to buy back used smartphones from customers to capture their residual value.
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In turn, Mercantile has agreements to buy these bought-back or traded-in devices from manufacturers and telcos. The company then sanitises, inspects and refurbishes them, and sells the spruced-up, second-hand devices to a global network of retailers and wholesalers.
Since entering the market for used devices in 2016, Mercantile has gone beyond the buyback-refurbish-resale cycle, offering value-adding services to differentiate itself from competitors. These include end-to-end data analytics to help manufacturers and telcos manage their buyback inventories and predict market trends.
For downstream buyers, the company offers product warranties, artificial intelligence-enabled grading, and cloud-based certification to assure them of the quality of the refurbished devices.
Growth and challenges
The refurbished-devices segment has grown to be a major part of Mercantile’s business, contributing around US$150 million to total revenue in FY2022. Meanwhile, the longstanding new-devices distribution segment contributed around US$200 million in revenue.
Overall growth in sales of both old and new devices was boosted by Covid-19, as demand for electronic devices skyrocketed with the rise of remote working and studying.
In FY2021, Mercantile’s revenue from the sale of goods – old and new – increased 25.3 per cent to US$301 million, from US$240.2 million in FY2020. It grew by a further 17.1 per cent in FY2022 to US$352.5 million.
In recent years, global economic conditions have been grim, with inflationary pressures and weakening currencies in emerging markets. Yet this is precisely where Mercantile sees growth opportunities.
“As consumers get more price-conscious and they want to move towards value for money, that is when they move from new to used devices,” said Narula.
The growth potential of the refurbished tech industry is driven by multiple factors, he added. Besides shifting consumer preferences, another key driver is government support for the circular economy, especially in Europe.
For instance, environmental, social, and corporate governance reporting mandates have motivated large organisations – including telcos – to put more effort into managing the environmental impact of electronic devices.
Asean has also made a growing commitment with the adoption of the Framework for Circular Economy in October 2021, he noted.
However, challenges remain. To protect domestic manufacturing, some governments impose restrictions on the import of refurbished devices. For example, Indonesia prioritises market access for local manufacturers of new devices, said Narula.
But the business’ resilience is rooted in its ability to hedge against risks, he added.
Its operations cover the whole range of tech products, both new and refurbished, and include both business-to-business and business-to-consumer segments. By spanning the entire life cycle of electronic devices, Mercantile is well-shielded from market fluctuations, said Narula.
New moves
The group’s next focus is developing its consumer-facing offerings. This involves building a new e-commerce platform, Remarkyt, to complement its existing business-focused marketplace Rehandel.
This is possible thanks to Mercantile’s existing back-end supply chain management and data-intelligence solution, developed in-house by a 30-person team.
Once launched, Remarkyt is expected to improve the group’s profit margins, as selling refurbished devices directly to individual consumers will remove the need for middlemen and associated costs.
“We are investing heavily around consumer behaviours over the next five years. We want to create stickiness so that consumers keep upgrading their devices with us,” said Narula.
As a participant of Enterprise Singapore’s Scale-Up programme, Mercantile is working with McKinsey & Company to treble group revenue to US$950 million by 2025, from US$353.8 million in FY2022.
With warehouses in Singapore, the United Arab Emirates, Hong Kong, Australia, and the United States, Mercantile is currently able to ship repurposed devices to over 100 countries and regions. The Singapore warehouse, for instance, has around 100 employees and can handle up to a million units of used devices a year.
In the next 12 to 18 months, the group is adding three warehouses in the US, the United Kingdom and Europe.
To emphasise the potential of the refurbished tech industry, Narula drew a comparison with the used-car market.
“The refurbished tech market is relatively new, only seven or eight years old, whereas the used-car market has been growing for a much longer time,” he said, foreseeing a “massive growth curve for refurbished tech in the coming years”.
“Cross-border trades with used devices are much easier than with used cars,” he added, confident that the market’s vast potential provides ample room for both new entrants and existing players to expand rapidly.
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