Swappie, based in Finland, has completed a Series B worth EUR 35.8 million (USD 40.6 million) to expand into new markets in Europe. The e-commerce business overhauls and sells used iPhones and takes care of the entire process from testing and repairing used mobile phones to selling the overhauled devices through its own marketplace with a 12-month guarantee.
Local VC and private equity firm TESI is a new Series B investor, along with Lifeline Ventures, Reaktor Ventures and Inventure Investors, all of whom participated in Swappie 2019 Series A. The total since the company was founded in 2016 is $ 48 million.
Swappie right now operates in Finland, Sweden, Denmark and Italy. The new funding will be used for Europe-wide expansion, starting with launches in Germany, Ireland, Portugal and the Netherlands this summer.
An expansion beyond Europe is also sought – therefore a broader roadmap for the future is being worked out.
“The main focus of this round is to become number one in Europe. But also to explore opportunities outside of Europe, ”says CEO and co-founder Sami Marttinen. "We will check that, but there are still no concrete plans that we want to announce here."
“Our business model still offers opportunities worldwide. So it's just a matter of creating the roadmap – where are you going next? "
Swappie promotes growing consumer demand in the region for refurbished phones, indicating that sales increased four-fold between 2018 and 2019, and generated over $ 35 million in net sales in 2019. Demand also continues to grow this year, with 5-fold growth in net sales growth in April and May 2020 over the same period last year despite the ongoing COVID-19 pandemic. Indeed, the trend of consumers buying more online seems to help their online market.
Tony Nysten, Investment Manager at TESI, commented on Swappies Series B in a statement as follows: “We believe that Swappie offers tremendous growth opportunities. The smartphone market in Europe is worth over EUR 100 billion, but used or refurbished phones currently make up just over 10% of it, and only every fourth used phone is currently resold. With its rapid growth to date, Swappie has demonstrated its ability not only to gain market share within the renovated market, but to expand the size of the category as a whole. The business has enormous potential. "
Swappie's early choice of market focus included not only the well-known turf in the Nordic countries, but also Italy in southern Europe. The latter was deliberately chosen because, according to Marttinen, it is a difficult market for e-commerce.
“In the first few days, we chose Italy because it was one of the toughest e-commerce markets in Europe – they have a very low e-commerce maturity index. Shopping behavior is very different. You need to build another level of trust in this market. There are many unique features such as cash on delivery, things like that. So we knew that we had to enter such difficult markets as early as possible in order to really conquer the global market – and to be able to fulfill our global ambitions.
"These days we have a much more advanced game book and market studies across Europe."
Swappie describes itself as a "scale-up" technology company because the entire value chain is addressed per marttinen.
“We did a lot on the hardware side there. When it comes to actually overhauling the devices, we can in many cases make them even stronger than the original devices. That said, we can go as deep as possible to the motherboard level when doing repairs. On the software side, of course, we make sales and distribution and everything else scalable. Make sure that the review processes and all processes in the factory meet the latest standards, ”he says.
"Because we were so focused on building processes and focusing so much on quality, we were able to really change the way people consume electronics," he adds. “When you think about it from the point of view of the local actors, they usually compete mainly for the people who are already buying used equipment. While we are able to deliver in this market by fully controlling the entire value chain from purchase to renovation. to sell the phones to consumers.
“Most of our customers buy used or reconditioned devices for the first time. Our biggest competitors are new smartphone retailers. ”
The most popular iPhone model sold on Swappie Marketplace last year was the iPhone 8 per Marttinen.
He won't release the exact number of iPhones that Swappie has renovated and sold at this time, but says it is a six-digit number – also known as "hundreds of thousands".
The team chose to focus on iPhones to ensure that the highest quality devices can be refurbished, while benefiting from the relatively higher cost of Apple's smartphone hardware compared to Android devices. However, it does not rule out offering a different type of outdated smartphone in the future.
"Business is growing very quickly now, but we noticed in the early days that prices for new devices had increased before this business started, so we were very lucky with the timing," he told theinformationsuperhighway, noting that Swappie this also benefited from the plateau of advances in handset models in recent years as the technology matured.
“If you can build trust in this business and ensure that the phones work as well as new devices – and that you make the buying process as safe as buying a new phone – you can actually accelerate the business's growth in this way . That is what we have really succeeded in doing. It's kind of a key to growing so quickly. "
"An important point was that because we overhaul every device in our own factory in Finland, we can provide customers with the highest quality devices under guarantee for a lot less than the cost of a new phone and also be more environmentally friendly," he added added.
In recent years, there have been cases where devices have been bricked up by iPhone users after being repaired by an unauthorized repair shop. According to Marttinen, Swappie only uses original parts for the iPhone to avoid such problems.
He also referred to the recent European Commission Proposals for an EU-wide “right to repair” electronics, suggesting that device manufacturers who sell in the region must respect repairability rather than using software updates to punish consumers for the lifespan of their current device want to extend.
Swappies The deal will also become part of a larger Commission mission to transition the EU to a circular economy, part of the green deal announced by current President Ursula von der Leyen. So if you want, it goes where the puck goes.
“It is really good for the environment that the right to repair legislation has been granted in recent years. This is also a very important point for us. This was one of the reasons why we wanted to do microscope repairs in our factories so we didn't have to scrap as many phones as you normally would, ”adds Marttinen.
What can't fix it? The percentage of iPhones that turn out to be really irretrievable through their processes is “extremely small"He says." We can actually do all the repairs that the phones can do, so basically water-damaged phones that work on the phone Seabed – these are of course not repairable. Or if the phone is bent too much or if the motherboard is completely ruined. But basically all the other bugs that we can fix. "
Swappie retailers are competing to sell new iPhones as they try to keep iOS users from buying a brand new iPhone. In the second-hand market, Marttinen mentions reBuy as one of the main competitors in the overhaul and resale of electronics, but does not focus on iPhones – it offers a wide range of devices, from wearables to smartphones and tablets, laptops, consoles and cameras.