How Affordable Smartphones Help Emerging Markets like Africa
Africa as a Key Emerging Market
Africa is one of the largest emerging markets today. Poverty and unemployment are critical issues in the region, which serve as barriers to many development touchpoints like education and health. But at the same time, the growth rate of its major economies, including South Africa, Kenya and Nigeria have been consistently high in the past few years. The continent itself is experiencing rapid industrialisation, and its people are becoming more interconnected through the introduction of new technologies which help the people overcome logistical and infrastructural challenges native to the region.
Mobile Phone Adoption in Africa
Mobile phones account for the dramatic boom of the telecom industry in recent years. Landlines or fixed-line phones have never really caught up with widespread use in Africa for many reasons, one being the infrastructure required for fixed-line telephones is expensive for the region, and extraneous factors like warfare, failed states, and natural disasters complicate the setup process. Mobile phones, however, need only minimal infrastructure for broad coverage and see use even in politically unstable areas like Somalia.
Smartphone sales in Africa have spiked up in recent years due to massive adoption, seeing a 65% year-on-year growth rate for the past five years. And unlike traditional phone lines, its adoption isn’t merely motivated by the need for communication services. For many Africans, smartphones bring more than just a means to communicate more efficiently, but also give access to “emerging technologies that bring Internet access to phones, thereby bypassing the need for a computer for connecting to the World Wide Web”.
Smartphone Ownership as Gateway to Digital Economy
At present, the only mode of access most Africans have to the internet is through their mobile phones, mainly through feature phones and smartphones. A recent GSMA survey into smartphone ownership in Africa noted remarked that the current “increase in smartphone ownership has been fundamental for enabling many people’s first internet experiences, and has offered them a gateway to enter the digital economy and benefit from life-enhancing opportunities.” The survey proceeded to highlight how internet access had helped many local individuals and entrepreneurs find jobs much quicker or advertise with a more significant reach than before they used smartphones. This is an essential benefit for the majority of low to middle-income people in emerging economies, who continuously struggle with perennial poverty due primarily to unemployment.
Potential Educational Benefits of Smartphone Ownership
In addition to enhancing employment and business opportunities for African locals through web access, smartphones have also been proposed as a tool to enrich the repertoire of Africa’s educational systems. A recent master study from Jonkoping University assessed the viability of mobile phones as educational tools for secondary school pupils. One of its key findings was that, given that mobile phones already see widespread use in Africa, they are effectively the most efficient means through which students and teachers gain access to advanced or better learning materials. They also act as platforms where students can expand their cultural milieu and “learn about diverse countries and attitudes.” The study concludes: “mobile phones can enhance academic outcomes of secondary school pupils and consequently increase their educational performances that in turn leads to the alleviation of destitution because poverty reduction is tightly connected to education”.
Affordability: The Primary Barrier to Smartphone Adoption
Emerging markets like Africa are characterised by low to middle-income populations, high unemployment rates, and lower industrial and business activities relative to major Western economies like the US. Many people in these regions live in multidimensional poverty, don’t have as much disposable income as their counterparts in developed countries, and find cost to be a significant, if not the largest hurdle to most decisions on goods purchases. This, in turn, becomes a substantial barrier to internet access for many people in emerging markets.
For perspective, smartphones have become significantly cheaper in recent years, and this has been especially felt in emerging markets. The GSMA report mentions that the average selling price (ASP) for smartphones have fallen markedly since 2008, going down as much as 20% in Africa. However, the ASPs of the most sought-out brands still fall in the 100 to 200 USD range in emerging markets, mostly due to inefficiencies in supply and demand factors.
The report noted that market pressures alone are not enough to bring prices down to a level affordable for low-income groups. It cites modern market trends to illustrate: “For example, the 2017 average smartphone cost in Kenya of around $118 is expected to drop to $109 in 2020. In India, the equivalent cost of $115 is projected to decrease to $97 within the same timeline”.
Refurbished Phones: A Better Alternative
The GSMA article recommends partnerships between local mobile network operators, state governments and OEMs to iron out some of these inefficiencies and lower prices to facilitate for greater smartphone adoption in the region. However, this comes at a significant expense for the parties involved, especially the OEMs, which are expected to shoulder the costs for facilitating such partnerships in addition to overhead fees and import duties.
Refurbished phones, however, have much lower baseline values than their brand-new counterparts, and could be resold at more affordable rates, even with all costs considered. As mobile telecom infrastructure grows, online refurbished phone retailers can have a greater platform to sell their wares at extremely competitive rates, at prices that are more in line with the purchasing power of low to middle-income groups. They also have leverage over OEMs in the following ways:
· As price continues to dominate purchase considerations, demand for cheaper but feature-rich GSM alternatives will continue to rise;
· Refurbished iPhone retailers can cater to the current gap in Apple product sales, and could compete with ASPs of other online retailers selling brand-new OEM products;
· Used phone retailers can also sell refurbished versions of popular brands in the region, like Samsung, which currently ranks first as the most traded phone in Africa;
· Africa’s secondhand market is virtually untapped despite the demand and the infrastructure being present, meaning immense revenue potential for initial traders in the market.
Unique Opportunities for Galaxy eSolutions
Galaxy eSolutions (GES) is an emergent Global Cross-border E-commerce business aiming to be the Market Leader in the Pre-owned and Refurbished Consumer Electronics Sector. With 26 online stores worldwide and counting, GES is set to have a significant portion of the global market share of refurbished phones and consumer electronics in the near future. Our goal is to create a global marketplace for refurbished, pre-owned smartphones and other consumer electronics.
Unlike many players in the secondhand retail ecosystem, GES is in a unique position due to its ownership and control of the entire business process: we source, refurbish, and distribute. This, in turn, creates efficiencies in cost along the way, which can be passed on to customers as savings. Watch this video and learn how you can partner with us today through our ICO program and be part of our success as we take emerging markets like Africa by storm.