The innovation scene in Asia continues to excite, with innovators changing the way we shop, bank, consume healthcare and more.

However, one area that seems to have received less attention is the second-hand trade industry under the circular economy development model. Specifically, the recycling and reuse of phones, computers, and tablets that work but are no longer used and can be brought back into service (rather than being thrown away and wasted).

The buying and selling of pre-owned products are not new. Innovators have changed how we search for and purchase pre-owned property and cars, for instance, and of course, there is a high market penetration rate for both. However, the pre-owned electronics industry has a relatively low penetration rate even though people replace their mobile phones and laptops more frequently.

Opportunities for innovators and investors

As a Chinese company, we have seen first-hand how the market in pre-owned consumer electronics has grown and developed over the past ten years, moving from a small, scattered and disorderly sector in the early years to one that has undergone a process of specialisation, standardisation and development on a large scale.

The scale of China’s pre-owned consumer electronics transaction and service market was 79 billion yuan in 2016 but climbed to 309.5 billion yuan in 2021, and the compound annual growth rate reached 31.4 per cent between 2016 and 2021. It is expected to grow to 987.5 billion yuan by 2026, at a compound annual growth rate of 26.1 per cent from 2021 to 2026.

Also Read: How barePack and &Repeat aim to reduce waste by introducing the circular approach to food packaging

In Southeast Asia and other parts of the world, this industry is much less developed and immature and therefore ripe for innovation. There is growing pressure among policymakers and the general public to increase recycling rates and a drive among the recycling industry to do this in an environmentally and economically sustainable way.

Automation has allowed the sector to flourish

Like any industry in its early stages, there are a series of pain points that need to be addressed. A major issue in the pre-owned electronics industry is a lack of standardisation regarding the quality inspection.

In China, we had hundreds of thousands of small and medium-sized businesses, all operating independently of each other, offering second-hand electronics of varying degrees of quality, some good and some not-so-good. This created confusion among consumers and lowered trust.

Furthermore, another reason for lack of trust is privacy concerns. Data security is hugely important in China, and it is required to obey regulations which specify how operators clean up personal information left on unused electronics and protect customers’ privacy and not disclose users’ information to any third party. Technology is also needed to ensure data can be permanently erased, providing assurance and confidence to consumers.

To better protect users’ data security, we use a self-developed data removal system named AiQingChu to clear all information in used mobile phones before other quality inspection processes. AiQingChu is a targeted and exclusive privacy protection algorithm which has ADISA Certification. At present, the system has cleared the privacy of more than 10 million devices.

Next, come the quality inspection processes before the pre-owned product is sorted and stored. In China, we have developed an automatic system named ‘Matrix 2.0’ that can quickly and accurately conduct a quality inspection for targeted products at a low cost.

Aiming at the non-standardised characteristics of pro-owned electronic products, we have independently developed ‘Camera Box 3.0’, an intelligent appearance testing device incorporated with an AI algorithm; ‘007 Automatic Intelligent Detection Platform’, which can automatically check whether the function of a used phone’s receiver, screen and camera are normal; and the ‘Tianyan X-ray’, designed for identifying whether a phone undergoes disassembly and repair or replacement of its parts without disassembly.

This automatic system allows us to process millions of pre-owned electronics (31.2 million devices in 2021), quickly and efficiently transporting, sorting and inspecting electronic devices. They are then priced by a proprietary algorithm based on their service time, physical condition, depreciation, market conditions and other factors.

To date, the market of pre-owned electronics in Southeast Asia, Europe and the USA is underestimated. Many factors lead to this condition, including cost (as I mentioned earlier), as well as the difficulty of consumers in buying workable, pre-used phones and computers. There are few regulations and limited trust. These all present opportunities for regional companies to come into the market and make changes, using China as an example.

More than just business

While the business practice makes sense when it comes to the recycling of idle electronics, the Environmental, Social, and Governance (ESG) case is even more convincing, both from an environmental point of view and a social one. This will help build a business case as investors increasingly look at ESG and other elements when making their investment decisions.

Also Read: Why GoImpact believes that education is the key to promoting ESG investment

It is important to note that ESG is rising in importance among investors. The past few years have seen record amounts of ESG investment worldwide, with US$649 billion invested in ESG-focused funds in 2021 and US$53 trillion expected by 2025. Investors are seeking innovative companies that both change industries for the better and have a positive effect on environmental, social and governance issues.

For companies in the Circular Economy, ESG and business go hand-in-hand. For instance, in July 2021, torrential rain hit the Chinese province of Henan, leading to major floods. Roads were flooded, transport services disrupted, towns were evacuated, and schools and hospitals were cut off.

The flood affected normal life for millions of people, including students from several cities. 16,800 students missed out on normal school with the fall semester disrupted by the unexpected rain. In addition to the destruction caused to the educational infrastructure, a huge amount of teaching aids and equipment were also impaired.

To help these affected schools get back on track for the fall semester, together with China Foundation for Rural Development and Pad for Hope, a charity organisation, ATRenew initiated the “AHS Charity and Love-Digital Education Aid Programme for Henan Beautiful Schools” and donated electronic teaching equipment, including 106 smart blackboards, 450 iPads, as well as office computers, printers, routers and other devices in demand, to the affected primary and secondary schools, and helped teachers’ informatization capacity construction.

In China, we have seen the pre-owned electronics sector grow from a low base a decade ago to a hundreds-billion-dollar industry, with plenty more to come. Southeast Asia is currently where we were ten years ago and is crying out for entrepreneurs to turn their attention to processing millions of pre-owned but idle devices, many of which are lying unused in people’s cupboards and desk drawers.

It’s time to enter a market that offers a perfect blend of solid business cases and environmental and social good.

–

Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic

Join our e27 Telegram group, FB community, or like the e27 Facebook page

Image credit: Canva Pro

The post The circular economy as the next frontier for Asia’s innovators appeared first on e27.