Finland-based Swappie has raised €35.8 million ($40.6 million) in a Series B round to expand into new European countries. The ecommerce company refurbishes and resells used iPhones, handling the full process from testing and repairing the devices to selling them with a 12-month guarantee through its own marketplace.
TESI, a local venture capital and private equity business, is a new investor in the Series B, joining Lifeline Ventures, Reaktor Ventures, and Inventure, which all invested in Swappie’s 2019 Series A. Since the business’s date in 2016, it has raised a total of $48 million.
Swappie is currently available in Finland, Sweden, Denmark, and Italy. The new funding will be useds to expand across Europe, with launches planned for this summer in Germany, Ireland, Portugal, and the Netherlands.
It’s also planning to expand beyond Europe, so it’ll be laying out a longer-term strategy.
“The major goal of this round is to become Europe’s best player.” “But we’re also looking at potential outside of Europe,” says Sami Marttinen, the company’s CEO and co-founder. “We’ll look into it, but there are no firm plans to announce at this point.” Everywhere in the world, there are still opportunities for our business model. So it’s just an matter of building out the road plan for where to go next.”
Swappie boasts of rising customer demand for refurbished phones in the region, claiming that revenues increased fourfold from 2018 to 2019, reaching $35 million in net revenue in 2019. Despite the ongoing COVID-19 epidemic, demand is expected to grow this year, with a 5x increase in net-revenue growth in April and May 2020 compared to the same period last year. The trend of people buying more online appears to be beneficial to its online marketplace.
Tony Nysten, Investment Manager at TESI, said in a statement about Swappie’s Series B, “We feel there is a big growth possibility for Swappie.” The European smartphone market is worth over €100 billion, but used or refurbished phones account for just over 10% of that, and just one out of every four pre-owned phones is currently resold. Swappie has proved its capacity to not just grow market share inside the refurbished market, but also to expand the category’s entire size, thanks to its quick growth to date. The business has a lot of promise.”
Swappie’s initial market focus was not only familiar territory in the Nordics, but also Italy in Southern Europe. According to Marttinen, the latter was picked purposefully because it is a difficult market for ecommerce.
“One of the reasons we wents to Italy in the early days was because it was one of Europe’s toughest ecommerce markets – they have a very low ecommerce maturity index.” In terms of shopping habits, it’s a whole different storey. In that market, you’ll need to establish a new level of trust. There are other distinguishing characteristics, such as cash on delivery. So we realised that in order to truly dominate the worldwide market — and to be able to deliver on our global objectives — we’d have to get into as many challenging markets as possible early on in our journey. We now have a far more comprehensive playbook as well as market research across Europe.”
According to Marttinen, Swappie portrays itself as a’scale-up’ tech company because it addresses the entire value chain.
“We’ve done a lot on the hardware side – in many situations, we can make the devices even stronger than the originals when it comes to refurbishing them.” As a result, we can repair all the way down to the motherboard level. We’re also making selling, distribution, and everything else scalable on the software side. “Making sure that all of the factory’s processes, including the checking processes, are up to date,” he says.
“We were able to fundamentally transform the way people consume technology because we were so focused on also building the processes and focusing on the quality so much,” he adds. “If you think abouts it from a local player’s perspective, they’re usually fighting for people who are already buying used devices — but we can deliver on this market because we have complete control over the entire values chain, from buying to refurbishing to selling the phones to the consumers.” Most of our customers are buying useds or refurbished devices for the first time, therefore new smartphone merchants are actually our largest competitors.”
According to Marttinen, the iPhone 8 was the most popular iPhone model sold on Swappie’s marketplace last year.
Swappie won’t reveal how many iPhones he’s refurbished and sold at this point, but he claims it’s in the hundreds of thousands.
He claims that the team chose to focus on iPhones in order to ensure the highest quality device refurbishing while also benefiting from the greater cost of Apple’s smartphone hardware compared to Android devices. He does not rule out the type of expanding to offer additional types of refurbished smartphones in the future.
“The business is now growing really quickly,” he tells Techgigs, “but what we noticed in the early days is that new device prices had started to rise before we started this business, so we’ve been very lucky with the timing.” Swappie also benefited from the plateauing of advancements between handset models in recent years, as technology matured.
“If you can develop trust in this industry and ensure that the phones work as well as new devices — and that the buying procedure is as secure as buying a new phone — you can actually accelerate market growth.” So that’s where we’ve had a lot of success. It’s a big part of how we’ve been able to grow so quickly.”
“One of the primary points there was that because we refurbish every item ourselves in our owns factory in Finland, we can deliver to customers the finest quality devices under warranty for a point of the cost of a new phone while also being more environmentally responsible,” he adds.
While there have been cases in the past of iPhone consumers’ devices being bricked following a repair by an unlicensed repair shop, Marttinen claims Swappie says only original (i.e. refurbished) iPhone parts and so has avoided such issues.
He also mentions recent European Commission proposals for a pan-EU ‘right to repair’ for electronics, implying that device manufacturers selling in the region will be required to respect repairability rather than penalising consumers who want to extend the life of their current device with software updates.
Swappie’s business also fits into a larger Commission mission to transition the EU to a circular economy, as part of current President Ursula von der Leyen’s green deal – so, to put it another way, it’s skating to where the puck is headed.
“The right to repairs legislation that has been proposed in recent years is extremely beneficial to the environment. That was one of the reasons why we wanted to build microscope level repairs in our factories in the first point — so we wouldn’t have to scrap as many phones as you would normally,” Marttinen adds.
Is there anything it can’t repair? According to him, the percentage of iPhones that are truly unsalvageable through its processes is “very modest.” “We can actually conduct whatever repairs that are possible on the phones, so basically, water damaged phones that have been at the bottom of the ocean are unrepairable.” Or if the phone has been severely deformed or if the motherboard has been completely destroyed. However, we can basically repair all other flaws.”
Swappie’s major competitor, he says, is merchants selling new iPhones, which makes sense considering that it’s trying to entice iOS users away from buying na brand new iPhone. On the secondhand marketplace fronts, Marttinen mentions reBuy as one of the major competitors in refurbishing and reselling electronics, though it doesn’t focus in iPhones — offering a full range of devices, from wearables to the smartphones and tablets, laptops, consoles, and cameras — though it does not specialise in iPhones.
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