(tape zipping) (bell dinging)

It's now part of the $64.5 billion secondhand phone market.

In 2022, 73.5 million used

and refurbished phones were shipped in North America alone.

It's an exploding business, and that's because phone makers

and the cellular carriers have pushed us all to.

- Trade in. - Trade in.

- Trade in. - Trade it for something new

that suits your life now.

- But who's winning and losing in this booming market?

When I asked the carriers

and Apple to show me where the phones go

and if and how they make money on them,

they wouldn't speak about specifics.

That's why I came here to a warehouse

in the middle of New Jersey.

Every week, this facility owned by US Mobile Phones

receives tens of thousands of devices,

primarily Apple from cellular carriers.

- So this is three pallets that just came in

and it should be around 3,000 iPhones.

- The company then sells those phones.

Some go to wholesalers in other countries,

others get cleaned up,

put through the refurbished process and sold

to individual buyers on sites like Amazon or Back Market,

a popular refurbished phone marketplace.

We got an iPhone 11.

- This one's a great example

'cause it's still kind of dirty.

- [Joanna] Yep, I picked out that 128-gigabyte iPhone 11

to track the cycle and how it goes

from arriving here with a trade-in value

of $200 to leaving here with a price tag of $350.

To understand, we have to go through the refurbish process.

The first stop for our iPhone 11: data erasure and triage.

- We take the phones, we start connecting them over here

to these computers that are all running special software

to remove any potential customer information

from the devices.

- [Joanna] After that, the phone is put to the test.

Well, many tests.

You can't sell a phone that doesn't work.

- [Sammy] Nice and white, no shadows.

Now checking the reds.

We're good status there, right?

So you take a screenshot,

now hit the slide switch up and down.

Say cheese.

- [Joanna] That obviously does not look good.

- [Sammy] That's 'cause of you.

We're not gonna blame the phone for that.

Say cheese. (camera snapping)

(phone beeping) - [Joanna] Ooh.

- [Sammy] So that was it checking speaker.

On the front over here, it's checking flesh.

You see the light on my hands?

So you can say yes, it's on.

- [Joanna] I'm really not good at this.

- [Sammy] It's okay. It's day one.

You're doing pretty good.

The devices now do a test call.

- [Joanna] Success. Our iPhone 11 passed all the tests.

The next step, cleaning.

- Toothbrush, plastic peg,

microfiber cloth, foam sponges, hand sanitizer.

(tranquil music)

- Looks nice and clean.

After that, it's onto grading where someone looks

over the device and assigns it a grade

so they know how to price it.

- [Sammy] Gonna look at the front glass, the housing,

the back glass, if there's any scratches.

- [Joanna] Success again, our device got an A.

And the final stop, kitting.

- We're gonna take this and put it into a kit box

so that we can get this shipped out to our customer.

- [Joanna] US Mobile Phones has a sister company

called Back in the Box,

which is responsible for selling refurbished phones directly

to consumers on sites like Amazon and Back Market.

Before the phone is shipped, the company packages it

with a charging cable and with lots of padding.

- Drop it. Drop it.

- I mean... - You could drop it.

- Our poor phone.

(Sammy chuckling)

(phone dropping)

Okay, so now it's ready.

But how much is someone going to pay for it?

Well, for some context,

Apple doesn't make the iPhone 11 anymore

but you can still buy a brand new 128-gigabyte model

for around $500 at some retailers.

Back in the Box obviously has to undercut that.

- Typically what we like to do is we like

to price refurbished products depending on the grade

between 20 to 30% below its retail price and generally,

that gives a good discount for the consumer

and gives us enough margin somewhere between 10-15%

to be able to have some money, have some profit to then go

and buy more inventory and support the business.

- [Joanna] On its website, Apple says the trade-in value

for a used, good condition iPhone 11 is $200.

Back in the Box told me it bought the iPhone 11

from a carrier for around $250.

Then after the phone was refurbished,

it listed it for $350 on Back Market,

which takes a 10% cut of that sale.

Back in the Box takes home around $65,

but that's not all profit.

- Put a ton of labor into cleaning that device.

There's also a charger in that box that we have to pay for.

There's also a ton of devices that came with that,

either had a bad battery

or at some other defect that we have to sell at a loss.

So we have to make enough profit

on the good ones to be able to absorb the hit

on the bad ones.

- So what did we learn here today?

Well, that there are more winners

than losers in this business.

The cellular carriers win when you trade in an old phone

and buy a new one.

Refurbished companies win when someone buys

a refurbished phone and consumers

and the environment win along the way.

- The downside is maybe to the stock price

of the manufacturers that wanna sell

as many brand new retail products.

- [Joanna] Perhaps, but even for Apple,

if all these phones end up

in the hands of more people, particularly

in developing countries, it means growing market share

and more people buying into the iPhone circle of life.

(Sammy singing in foreign language)

(Sammy chuckling)

- That's all I got for you.

- [Joanna] That's very good.