Second-hand tech won't cannibalize primary market

Preowned IT goods can help boost brand value and compete against lower priced products, notes refurbished equipment seller, adding that second-hand market can benefit primary marketplace in many ways.

Rather than hold the second-hand market in contempt, IT vendors should see the benefits this industry segment can have on their brand and ability to rival competing product offerings in the marketplace.

Mike Sheldon, CEO of Network Hardware Resale, acknowledged that first-hand sales channels do occasionally compete with second-hand markets for the same sale, leading to tension between the two markets. His company specializes in selling refurbished networking equipment, with special focus on Cisco Systems equipment.

Despite the competing interests, Sheldon noted that the benefits from having a strong and healthy second-hand market outweigh concerns primary vendors have about the impact on their revenue. "A vibrant secondary market adds significant value to the brand, through lower lease rates and higher perceived brand value, because of the higher residual value [generated by the sale of the equipment]," he explained.

Second-hand equipment sales can also help dominant brands compete against lower priced, entry-level competitors, he said, pointing to a scenario where cheaper, second-hand Cisco product offerings can better rival Hewlett-Packard Procurve or Huawei.

"Most manufacturers acknowledge that they would rather a customer buy a used piece of their own equipment, than a new piece of their competitors' equipment," he noted.

He added that customers should view second-hand products as part of their company's supply chain and not as a potential replacement of new IT equipment.

By combining traditional primary sources and second-hand vendors, IT managers not only have more options to choose between new and used equipment, they can also opt for faster product delivery, and less expensive maintenance or legacy equipment that are no longer in the market, he said.

For companies considering second-hand equipment, Sheldon noted that the range of quality and value is wide, just as it is with new IT equipment marketplace. "Stick with a well regarded, large, support and service-oriented firm, and there is little to worry about in either the primary or secondary markets," he added.

For the second-hand IT market, in particular, he said warranty and the seller's resources, including financial, technical, and service resources, are the two most important variables enterprise customers should take note of.

Software businesses think otherwise
But while hardware IT products can be refurbished and resold without much fuss, the same cannot be said for the software market due to licensing restrictions.

For instance, a U.S. court in September ruled that a used software vendor cannot sell unopened Autodesk software he had purchased from office and garage sales, according to an Associated Press report because he purchased the product without explicitly agreeing to the licensing agreement applied to the original buyer. This sales contract outlined that the rights to install Autodesk software were being licensed, not sold.

Some second-hand software companies, however, managed to circumvent licensing agreements. In 2008, a used software reseller found a loophole in Microsoft's licensing agreement and sold preowned software bought before 2007--before the loophole was plugged.

Players in the video games industry also oppose second-hand sales, where some game publishers had attempted to stem second-hand sales by using one-time codes to unlock multiplayer mode for new games. One game publisher, though, took a different stand. Take-Two's chairman, Strauss Zelnick, reportedly said consumers should not be punished for buying second-hand games. Instead, he said publishers should give gamers a reason to buy new titles by making and marketing quality game content.