Demand For Retired PCs Outweighs Supply: Gartner
Business opportunities are generally good for commercial-resale of secondary PCs as lower capital outlay means higher return on investment (RoI).
Worldwide demand for secondary PCs is greater than supply, but only 44 per cent of PCs entering the secondary market will be reused, according to Gartner. Analysts said approximately one in five PCs dedicated for reuse will find their way from a mature to a developing market. Export tariffs and high transportation costs are important factors restricting export volume flowing from mature markets to emerging markets.
Gartner defines the secondary-market PC as a PC that has been used for more than three months by its primary/initial user and then passed on to a secondary fate.
"The secondary PC market offers great opportunity to specialised intermediaries, resellers or vendors, but it is a highly fragmented and competitive market," said Meike Escherich, principal analyst at Gartner, based in the UK. "Legislation tends to be more general, focusing on the environment, privacy, and how a company must take care of a person’s non-public information. It is an opportunistic market and is highly fragmented, with tens of thousands of players involved. Unfortunately, an increasing number of laws based on the producer responsibility principle means that small players find it harder to compete with large vendors, which all need to resell a certain percentage of their secondary PCs."
Business opportunities are generally good for commercial-resale of secondary PCs as lower capital outlay means higher return on investment (RoI). It is not uncommon that refurbished PCs offer equal or even better margin opportunities than new PCs. With an estimated profit margin on a refurbished PC between $10 and $50 for a three-year-old machine, the economies of refurbishment rely on multiple PCs of the same configuration than individual systems, mainly provided by large and midsize businesses and government agencies.
Software piracy is the main driver in the secondary PC market – hardware can be made inexpensive if supplied without licenced software. Branded PCs are particularly sought after because they may still display the original software licence stickers, which provide some defence if checks into the authenticity of the software are made. In addition, Microsoft Windows Vista operating system requirements have created a visibly increased demand for new PCs with greater hardware capabilities resulting in an increased supply of secondary PCs.
In terms of inhibitors, the market has to deal with transportation costs, import tariffs and environmental legislation that make it harder for low-volume players to compete. In addition, product quality, falling average selling prices (ASPs) of new PCs, and the increasing buyer preference for notebooks and most-recent specifications are threatening the current market.
The market for secondary PCs varies by region, especially as a result of legal and regulatory environment. The largest exporters of secondary PCs are North America, Western Europe, Japan and Australia. In terms of demand, the fastest-growing regions in terms of demand are the Middle East and Africa (MEA) and Asia/Pacific emerging markets, in particular China.
"The demand for secondary PCs in emerging regions, such as Eastern Europe, MEA, Latin America and parts of Asia/Pacific, is likely to grow as pressure increases on developing countries to accept used PCs as a viable technology solution for more basic computing tasks such as Internet surfing and Web e-mail," said Escherich. "But, the emergence of the new ultralow-cost mini-notebooks could threaten the refurbished market and could see a number of users leave the secondary PC market and opt for a simpler but new notebook. Nevertheless, we expect that most buyers of used PCs will prefer a higher-specification A-branded PC over a basic mini-notebook. Also in times of uncertainty and recession, we expect replacements will slow down with demand increasing and supplying decreasing."
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