eRecycling Corps Finds Niche as Broker of Used Cellphones

Think of it as “Sanford and Son” 2.0.

Turns out, those outdated devices you have taking up space in the junk drawer are worth a great deal, a fact that eRecycling Corps is finding lucrative.

The company, which is based in the Dallas suburb of Irving, TX, raised $105 million recently on a simple premise: What we in America and Europe view as junk are highly sought-after consumer goods in emerging markets. eRecycling Corps has become the middleman.

“I’m the Fred Sanford of the Internet,” says David Edmondson, eRecycling Corps co-founder and CEO, comparing himself to the junkyard owner in the 1970s television show, “Sanford and Son.”

This is how it works: eRecycling Corps has agreements with major wireless carriers that can offer to buy back old phones in return for an upgrade. “When you give a customer an instant in-store credit—give them $80 that they didn’t they would have—they end up spending $100 on other things they’d like to have,” Edmondson says.

The store then sends the phone to eRecycling Corps, which brings it back to factory condition and ships it to partners in emerging markets for resale. In rare cases, Edmondson says, the phone is too damaged or old for use so it is stripped down to parts.

eRecycling Corps takes a commission or service fee from wireless partners. The model varies depending on the carrier, Edmondson explains. Individual pricing is monitored daily by software but they typically adjust prices for the phones once a week.

“The residual value has never been brought into the equation,” he says. “There is a lot of economics to be captured by reselling these phones.”

In 2010, the U.S. Environmental Protection Agency reported that we disposed of 152 million mobile devices, or 416,000 each day. “This is a huge environmental problem,” Edmondson says.

The wireless industry should work more like the retail car business, he adds. “When you buy a new car, you don’t park the old one behind your house and let it rot,” he says. “It doesn’t make sense economically.”

The message has resonated with its customers and investors. In May, the company announced it had traded in 1.1 million devices that month. eRecycling Corps plans to use the $105 million to … Next Page »

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