We got a unique opportunity to sit down with EcoATM?s Founder and CMO Mark Bowles to talk about the company?s history and how they managed to get to where they are today, a division of Outerwall, the parent company of Coinstar and Redbox.
The idea started like many do, sitting in a coffee shop. EcoATM was created from the need to resolve a problem that only 3% of people were recycling their phones in the year when a billion phones had been shipped in 2008. There are a lot of devices that are simply sitting around not being used after they?ve passed their prime. And they realized that there were a lot of secondary and tertiary markets for recycling smartphones and the components within them. So, they set out to understand the market a bit better and to help improve awareness of phone recycling by making it more prominent, easier to use and above all giving people an instantaneous monetary payout for those devices.
At the time, they had already figured out that there was already a fairly mature recycling industry for smartphones that they could tap into thanks to all of the refurbs and insurance programs run by or used by the carriers. Their goal was to put smartphone recycling in people?s paths and once they eventually decided that they needed to recycle their smartphones they would be aware of the ability to recycle. And they wanted to make it instantaneous, unlike some other programs where you had to send your phone in and potentially not get it back or not get the price you were expecting. They also needed to figure out how to resolve the data issue because a lot of people are worried about their phone?s data ever getting out. And because smartphones are so small, people have no issues with simply keeping old phones (and their data) in storage in some other drawer. This was in line with their research that had determined that at that time (2008) most families had on average 5-6 phones sitting somewhere in storage.
So, their solution was to create a kiosk that would resolve all of these problems in a single method, probably influenced by the idea of what Coinstar had done with their machines converting people?s change into cash and gift cards. And then they filed some patents around the idea and went out to test the market with a few prototype devices.
New to Old, from left to right
The first prototype device, in fact, was a big wooden box with a touch screen with logos to make it seem far more complex than it actually was inside. But they used this to test the market and were able to gauge the interest of people in a retail setting as they passed by the box. They first tested the kiosk idea in Omaha, Nebraska and on the first day they were able to recycle 23 phones. And within 2 weeks, they had waiting lines and in 3 weeks they had 45 minute waiting lines. Once the lines got that long, they started to ask people in line if they had phones with retractable antennas because those phones likely wouldn?t pay anything out due to their age but they would still take them to recycle them. But many people simply continued to stay in line because they wanted to see what the machine would say. By the time they reached that point, people were waiting for the store to open so that they could recycle their phones. They eventually collected 2,300 phones in a 30 day period even in such a place like Omaha, Nebraska that isn?t necessarily famous for mobile phone saturation.
This helped them learn about the idea that phone recycling kiosk was considered to be a neutral entity and that it wouldn?t try to barter you down on price or negotiate. If you didn?t like the price that it offered you, you could simply walk away and go somewhere else. This concept was very important to EcoATM as a company in the future as their first deployments of these kiosks usually would require an attendant to assist in the finalization of the recycling process. But they found that if that attendant stayed around the kiosks as people walked up to them, they simply scared people off from using the device.
They eventually started to work harder and harder on the technology of the ecoATM to a point where the device could eventually be deployed without any human attendants. They are fully automated and are now on the third generation of their ecoATMs which have all of the latest technology that allows them to properly evaluate, price and recycle the device.
EcoATM?s latest generation of machines uses a combination of cameras to physically scan the device and uses an algorithm to analyze the device?s condition as well as a USB plug to make sure that the phone will actually turn on. It then takes the condition of the phone and its operating condition and plugs it into an algorithm that they created to help value the price of the phone. The system then gives the phone a grade based on an 8 grade system. The algorithm takes that grade into account the pre-determined price that ecoATM?s partners will pay them for the device in order to ensure that they are able to not buy the phone at a loss and so that they can actually sell the device to the recycler.
Their recycling partners don?t individually buy devices, but rather they buy certain types of devices with certain types of defects or without certain defects. They have about 12-15 partners that they work with who buy those flows of devices and allow them to bid for a price on that block of phones. This system is what determines whether or not a phone gets taken by ecoATM since the device?s payout may simply be too low to be worth trying to take it in. All of this eventually led to EcoATM getting acquired by now parent company, Outerwall, to the tune of $350 million in cash, back in July of 2013.
Following that, I actually got an opportunity to test out their device, with Amy Rice their director of PR and communications and I was really impressed with the complexity of the ecoATM machine. It really does have virtually every possible power connector and it operates very similarly to how a normal ATM would, even down to the way the machine sounds. I got a chance to take a look inside of the ecoATM machine and saw some really interesting hardware that explains how they are able to evaluate the device and test it. Since this is a unique device and a unique opportunity we can?t necessarily take pictures or talk about what components we saw inside that drive the whole machine, but it is a very well designed orchestra of machines. And in order to protect people and ecoATM from theft and fraud, they do have cameras, a fingerprint reader and a card reader to read your driver?s license just to make sure that people are not trying to sell them stolen phones. They even make sure that your face matches the image on your driver?s license and if it doesn?t they?ll ask you to take off your hat or retake the photo. After all, some phones do go for hundreds of dollars apiece, even when recycled. Then, once you?ve accepted the price and agree to the price, it will take the phone and any accessories you have included with it. It also gives you an option to donate a portion or all of your phone?s value to charity or to get cash payment instead. Once you choose cash, it will simply pay you out in bills and you can be on your way. In my case, I was paid in ecoATM bucks, but you will
get paid in US dollars if you use a real ecoATM machine and not a mockup version like mine.
EcoATM?s current install base is around 900 ecoATMs across the country, with about 12 of them in the San Diego Area alone. Most of them are located in high traffic areas like shopping malls that are both busy but also very safe to have something like an ecoATM.
We also learned some interesting information about the recycling habits of people and certain devices. For example, the iPhone 4 32GB is the most recycled device in the company?s history. When the Samsung Galaxy S4 was made available on April 27th of last year they saw a surge of selling back older Samsung models in following two months. ecoATM also saw a 400 percent increase in sell backs between late April and mid-June 2013, which maps to the initial spike in Samsung Galaxy S4 sales shortly after availability. Additionally, in August of 2013, four months after release, they saw the highest Galaxy S2 sell backs, while the Galaxy S3 had the most sell backs in December of 2013, again a few months after the release of the Galaxy S4. Overall, December 2013 was actually the biggest month for Samsung device trade-ins overall.
Taking that data into consideration and the fact that the Samsung Galaxy S4 didn?t sell as well as Samsung would?ve hoped, there?s a good chance some people may have moved away from Samsung that month or the month before. Clearly, there is a lot of value in following the statistics of smartphone recycling and what trends are going on as people continually refresh their smartphones every 24 months. Sure, some of these new upgrade programs reduce the amount of smartphones that are getting recycled, but the overall number of people utilizing these programs is minuscule compared to the overall user base. Mark said that they don?t really see the lower-cost smartphones really cannibalizing smartphone recycling as they could drag down the overall ASP of smartphones. However, with the introduction of phones like the Nokia X for $89, we?re not sure how long that?ll be true. But even so, people are still going to want to get rid of old phones, one way or another. And when they do, ecoATM is going to be there to do it.