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Swappie bags $40.6M to sell more secondhand iPhones across Europe

Finland-based Swappie has closed a €35.8 million ($40.6M) Series B to expand into new markets in Europe. The ecommerce business refurbishes and resells used iPhones, taking care of the entire process from testing and repairing used handsets, to selling the refurbished devices via its own marketplace, with a 12-month warranty.

Local VC and private equity firm TESI is a new investor in the Series B, along with Lifeline Ventures, Reaktor Ventures and Inventure Investors, all of whom participated in Swappie’s 2019 Series A. The total raised to date since the business was founded in 2016 is $48M.

Right now Swappie operates in Finland, Sweden, Denmark and Italy. The new financing will be used to expand across Europe, beginning with launches in Germany, Ireland, Portugal and the Netherlands this summer.

It’s also eyeing expansion beyond Europe — so will be speccing out a broader roadmap for the future.

“The main focus of this round is to become the number one player in Europe. But also to explore opportunities outside Europe as well,” says CEO and co-founder Sami Marttinen. “That’s something we will be looking into but no concrete plans to announce at this point.

“There are still opportunities for our business model everywhere in the world. So it’s a matter of just building the roadmap — where to go next.”

Swappie’s Jiri Heinonen (CMO) and Sami Marttinen (CEO) (Photo credit: Swappie)

Swappie touts growing consumer demand in the region to buy refurbished phones, saying that from 2018 to 2019 revenues grew 4x, hitting $35M+ in net revenue in 2019. It’s also seeing demand continuing to grow this year — recording a 5x increase in net revenue growth in April and May 2020 vs the same period last year, despite the ongoing COVID-19 pandemic. Indeed, the trend of consumers shifting to buying more online looks to be a help for its online marketplace.

Commenting on Swappie’s Series B in a statement, Tony Nysten, Investment Manager at TESI, said: “We believe there is a huge growth opportunity for Swappie. The smartphone market in Europe is worth over €100BN but used or refurbished phones currently make up just over 10% of that and only one in four pre-owned phones are currently re-sold. Through its rapid growth to date, Swappie has proven its ability to not just grow market share within the refurbished market, but to expand the size of the category overall. The business has enormous potential.”

Swappie’s early choice of market focus included not only familiar turf in the Nordics — but Italy, in Southern Europe. The latter was chosen deliberately on account of it being a tough market for ecommerce, per Marttinen.

“In the really early days the reason why we went to Italy was because it was one of the toughest ecommerce markets in Europe — they have a really low ecommerce maturity index. It’s very different in terms of shopping behavior. You need to build another level of trust in that market. There are lots of unique traits like cash on delivery, things like that. So we knew that in order to really conquer the market globally — and to be able to deliver on our global ambitions we would need to enter as difficult markets as early in our journey as possible.

“These days we have a much more advanced playbook and market studies across Europe.”

Swappie describes itself as a ‘scale-up’ tech business on account of addressing the whole value chain, per Marttinen.

“We’ve done a lot there on the hardware side — when it comes to actually refurbishing the devices we can make them even stronger then the original devices in many cases. So that means we can go as deep as onto the motherboard level in the repairs. Then on the software side, of course, we’re making selling and distribution and everything else scalable. Making sure that the checking processes and all the processes in the factory are according to the latest standards,” he says.

“Because of being so focused in also building the processes and focusing on the quality so much, so actually we have been able to truly change the way people consume electronics,” he adds. “If you think about it from a local player perspective they are typically mostly competing for the people who are already buying used devices — whereas we are able to deliver on this market by having full control of the entire value chain, from buying to refurbishing, to selling the phones to consumers.

“Most of our customers are buying used or refurbished devices for the first time — so actually our biggest competitors are new smartphone retailers.”

The most popular iPhone model sold on Swappie’s marketplace last year was the iPhone 8, per Marttinen.

He won’t disclosed the exact number of iPhones Swappie has refurbished and sold at this point but he says it’s a six-figure number — aka ‘hundreds of thousands’. 

The team chose to focus on iPhones to ensure they can deliver the highest quality device refurbishment, he says, while also benefiting from the relatively higher cost of Apple’s smartphone hardware vs Android devices. Though he doesn’t rule out expanding to offer another type of refurbished smartphone in future.  

“The business is now growing really rapidly but what we noticed in the early days is that the new device prices had started to rise before we started this business so we have been very lucky with the timing,” he tells TechCrunch, noting that Swappie also benefitted from the plateauing into advancements between handset models in recent years, as the technology matured.

“If you can build trust into this business, and make sure that the phones function as well as new devices — and that you’re actually making the buying process as well as safe as buying a new phone — that way you can actually accelerate the growth of the market. So that’s what we have been really successful in. It’s kind of the key to being able to grow so quickly.”

“One main point there has been that because we refurbish every device ourselves in our own factory in Finland we can deliver to customers the highest quality devices under warranty for much less than the cost of a new phone and also be more environmentally friendly,” he adds.

While, in years past, there have been instances of iPhone users’ devices bricked after a repair by an unauthorized repair shop Marttinen says Swappie is using only original iPhone parts so has avoided such problems.

He also points to recent European Commission proposals for a pan-EU ‘right to repair’ for electronics which suggests device makers selling in the region will be required to respect repairability, rather than using software updates as a way to penalize consumers who seek to extend the lifespan of their current device.

Photo credit: Swappie

Swappie’s business also slots into a wider Commission mission to transition the EU to a circular economy, as part of the green deal announced by current president, Ursula von der Leyen — so it’s skating to where the puck is headed, if you like.

“It’s really good for the environment that the right to repair legislation has come forward in the past few years. That’s one very important point for us as well which was one of the reasons why we wanted to built microscope level repairs in our factories — so we wouldn’t have to scrap as many phones as you normally would,” Marttinen adds.

What can’t it repair? The proportion of iPhones which turn out to be truly unsalvageable via its processes is “extremely small“, he says. “We can actually do any repairs that are possible to do the phones so, basically, water damaged phones which have been at the bottom of the ocean — those are of course unrepairable. Or if the phone is bent too much or if the motherboard is completely ruined. But basically all the other faults we can repair.”

On the competitive front, he says Swappie’s main rival are retailers selling new iPhones — given it’s trying to woo iOS users away from buying a brand new iPhone. On the secondhand marketplace front Marttinen mentions reBuy as one of the main rival players in refurbishing and reselling electronics, though it does not focus on iPhones — offering a full range of devices, from wearables to smartphones and tablets, laptops, consoles and cameras.

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Fairphone 3 is a normal smartphone with ethical shine

How long have you been using your current smartphone? The answer for an increasing number of consumers is years, plural. After all, why upgrade every year when next year’s model is almost exactly the same as the device you’re holding in your hand?

Dutch social enterprise Fairphone sees this as an opportunity to sell sustainability. A chance to turn a conversation about ‘stalled smartphone innovation’ on its head by encouraging consumers to think more critically about the costs involved in pumping out the next shiny thing. And sell them on the savings — individual and collective — of holding their staple gadget steady.

Its latest smartphone, the Fairphone 3 — just released this week in Europe — represents the startup’s best chance yet of shrinking the convenience gap between the next hotly anticipated touchscreen gizmo and a fairer proposition that requires an altogether cooler head to appreciate.

On the surface Fairphone 3 looks like a fairly standard, if slightly thick (1cm), Android smartphone. But that’s essentially the point. This 4G phone could be your smartphone, is the intended message.

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Specs wise, you’re getting mostly middling, rather than stand out stuff. There’s a 5.7in full HD display, a Qualcomm Snapdragon 632 chipset, 4GB of RAM and 64GB of storage (expandable via microSD), a 12MP rear lens and 8MP front-facing camera. There’s also NFC on board, a fingerprint reader, dual nano-SIM slots and a 3,000mAh battery that can be removed for easy replacement when it wears out.

There’s also a 3.5mm headphone jack: The handy port that’s being erased at the premium smartphone tier,  killing off a bunch of wired accessories with it. So ‘slow replacement’ smartphone hardware demonstrably encourages less waste across the gadget ecosystem too.

But the real difference lies under the surface. Fairer here means supply chain innovation to source conflict-free minerals that go into making the devices; social incentive programs that top up the minimum wages of assembly workers who put the phones together; and repairable, modular handset design that’s intended to reduce environmental impact by supporting a longer lifespan. Repair, don’t replace is the mantra.

All the extra effort that goes into making a smartphone less ethically challenging to own is of course invisible to the naked eye. So the Fairphone 3 buyer largely has to take the company’s word on trust.

The only visual evidence is repairability. Flip the phone over and a semi-opaque plastic backing gives a glimpse of modular guts. A tiny screwdriver included in the box allows you take the phone to pieces so you can swap out individual modules (such as the display) in case they break or fail. Fairphone sells replacements via a spare parts section of its website.

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Despite this radically modular and novel design vs today’s hermetically sealed premium mobiles the Fairphone 3 feels extremely solid to hold.

It’s not designed to pop apart easily. Indeed, there’s a full thirteen screws holding the display module in place. Deconstruction takes work (and care not to lose any of the teeny screws). So this is modularity purely as occasional utility, not flashy party trick — as with Google’s doomed Ara Project.

For some that might be disappointing. Exactly because this modular phone feels so, well, boringly normal.

Visually the most stand out feature at a glance is the Fairphone logo picked out in metallic white lettering on the back. Those taking a second look will also spot a moralizing memo printed on the battery so it’s legible through the matte plastic — which reads: “Change is in your hands”. It may be a bit cringeworthy but if you’ve paid for an ethical premium you might as well flaunt it.

It’s fair to say design fans won’t be going wild over the Fairphone 3. But it feels almost intentionally dull. As if — in addition to shrinking manufacturing costs — the point is to impress on buyers that ethical internals are more than enough of a hipster fashion statement.

It’s also true that most smartphones are now much the same, hardware, features and performance wise. So — at this higher mid-tier price-point (€450/~$500) — why not flip the consumer smartphone sales pitch on its head to make it about shrinking rather than maximizing impact, via a dull but worthy standard?

That then pushes people to ask how sustainable is an expensive but valueless — and so, philosophically speaking, pointless — premium? That’s the question Fairphone 3 seems designed to pose.

Or, to put it another way, if normal can be ethical then shouldn’t ethical electronics be the norm?

Normal is what you get elsewhere with Fairphone 3. Purely judged as a smartphone its performance isn’t anything to write home about. It checks all the usual boxes of messaging, photos, apps and Internet browsing. You can say it gets the job done.

Sure, it’s not buttery smooth at every screen and app transition. And it can feel a little slow on the uptake at times. Notably the camera, while fairly responsive, isn’t lightning quick. Photo quality is not terrible — but not amazing either.

Testing the camera I found images prone to high acutance and over saturated colors. The software also struggles to handle mixed light and shade — meaning you may get a darker and less balanced shot that you hoped for. Low light performance isn’t great either.

That said, in good light the Fairphone 3 can take a perfectly acceptable selfie. Which is what most people will expect to be able to use the phone for.

Fairphone has said it’s done a lot of work to improve the camera vs the predecessor model. And it has succeeded in bringing photo performance up to workable standard — which is a great achievement at what’s also a slightly reduced handset price-point. Though, naturally, there’s still a big gap in photo quality vs the premium end of the smartphone market.

On the OS front, the phone runs a vanilla implementation of Android 9 out of the box — preloaded with the usual bundle of Google services and no added clutter so Android fans should feel right at home. (For those who want a Google-free alternative Fairphone says a future update will allow users to do a wipe and clean install of Android Open Source Project.)

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In short, purely as a smartphone, the Fairphone 3 offers very little to shout about — so no screaming lack either. Again, if the point is to shrink the size of the compromise Fairphone is asking consumers to make in order to buy an ethically superior brand of electronics they are slowly succeeding in closing the gap.

It’s a project that’s clearly benefiting from the maturity of the smartphone market. While, on the cellular front, the transformative claims being made for 5G are clearly many years out — so there’s no issue with asking buyers to stick with a 4G phone for years to come.

Given where the market has now marched to, a ‘fairer’ smartphone that offers benchmark basics at a perfectly acceptable median but with the promise of reduced costs over the longer term — individual, societal and environmental — does seem like a proposition that could expand from what has so far been an exceptional niche into something rather larger and more mainstream.

Zooming out for a second, the Fairphone certainly makes an interesting contrast with some of the expensive chimeras struggling to be unfolded at the top end of the smartphone market right now.

Foldables like the Samsung Galaxy Fold — which clocks in at around 4x the price of a Fairphone and offers ~2x the screen real estate (when unfolded), plus a power bump. Whether the Fold’s lux package translates into mobile utility squared is a whole other question, though.

And where foldables will need to demonstrate a compelling use-case that goes above and beyond the Swiss Army utility of a normal smartphone to justify such a whopping price bump, Fairphone need only prick the consumer conscience — as it asks you pay a bit more and settle for a little less.

Neither of these sales pitches is challenge free, of course. And, for now, both foldables and fairer electronics remain curious niches.

But with the Fairphone 3 demonstrating that ethical can feel so normal it doesn’t seem beyond the pale to imagine demand for electronics that are average in performance yet pack an ethical punch scaling up to challenge the mainstream parade of copycat gadgets.

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LG hints at gesture interface for smartphone flagship next month

LG has put out a gesture-heavy hint ahead of the annual unveiling of new smartphone hardware at the world’s biggest mobile confab, Mobile World Congress, which kicks off in a month’s time.

The brief video teaser for its forthcoming MWC press event in Barcelona, which was shared today via LG’s social media channels, shows a man’s hand swiping to change on-screen content, including the message “goodbye touch.”

The title of LG’s teaser video includes the name “LG Premiere,” which could be the name of the forthcoming flagship — albeit that would be confusingly similar to the mid-tier LG Premier of yore. So, hopefully the company is going to make that last ‘e’ really count.

Beyond some very unsubtle magic wand sound effects to draw extra attention to the contactless gestures, the video offers very little to go on. But we’re pretty sure LG is not about to pivot away from touchscreens entirely.

Rather, we’re betting on some sort of Leap Motion -style gesture control interface being added to the front of the handset, using sensors to detect a hovering hand, for example — probably accompanied by heavy marketing about how filthy-with-germs phone screens are so it’s totally better you don’t actually touch them.

Safe to say, the idea looks terribly gimmicky. Or, well, just terrible. This kind of stuff has been tried (and failed to stick) plenty of times before — as long ago as a decade, in the now no longer mobile-maker Sony Ericcson’s case.

Samsung also added a gesture feature, called Air Gesture, to some of its handsets more than five years old — which lets smartphone users do things like wave to answer a call or swipe through air to scroll up. Some of its smartphones also offer hands-free scrolling via facial tracking.

Yet smartphone users everywhere still seem as hooked as ever on actually fingering their touchscreens. And gesture-based interfaces have, fittingly enough, largely failed to stick.

Although you could view Apple’s Face ID technology as a form of non-touch gesture control, as my TC colleague Ingrid Lunden suggests. Albeit the primary point in that case is security/authentication, so it’s more than just a frictionless way to interact with a device without touching it.

Smartphone makers — and Android OEMs especially — are under acute pressure to stand out in a fiercely competitive and growth-stalled market. So despite a flighty history for gesture interfaces on mobile, a bunch of hardware experiments look to be in play, such as whatever LG’s cooking.

And that includes — as we noted earlier today — what’s now open flirtation with foldable tablet smartphones (see: Xiaomi teased a double folder phone.)

We’ll be on the ground in Barcelona to bring you news of all the major hardware releases next month — including keeping an eye on whatever LG is preparing to unbox (but not actually touch) on February 24. So stay tuned.

We just hope that another detail in LG’s description for the teaser video, in which it asks its followers whether they’re “prepared to get stunned by the LG Premiere,” does not augur a highly potent new form of contactless haptic feedback.

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