Some Highlights:
- ITAD sector can be divided into four categories: distributed assets (PC, laptop), data center, mobility and miscellaneous (scrap).
- Distributed assets are typically sold directly through Amazon and eBay while data center purchases may require third-party maintenance services for extended warranties.
- Mobility products often go to other countries like India, China and Hong Kong.
- Recycling requires capital intensive investments due to small size and fewer precious materials in ewaste.
From David Daoud:
There are three major types of hardware groups in ITAD. One is your classic mass market (distributed systems): PCs, printers, monitors, POS, etc. Then you have your mobile devices (phones and tablets) that are handled by probably different type of people within the enterprise. And then you have the data center, which is also completely siloed. So do we have really three silos within the enterprise?
Todd’s assessment:
Todd Zegers,
President & CEO
Circular Integrity
[email protected]
(949)346-1683
Yes, I would argue it is. I would add a fourth one, because you’re going to have this miscellaneous kind of scrap. So if you’re manufacturing things, you may have things that they consider electronics that aren’t your traditional IT related products, but the asset managers are tasked with disposing of some of this old technology like a blood analyzer or some of these other category of devices. So I would argue there are four categories.
If you look at the space, when you think about getting rid of your ITAD products, not everybody is good in all of those product categories. There are some people that are really good at many of those things that can give the client end-user a kind of one throat to choke. But depending on the value of your product, the services you require, where that product is located, it’s rare that one person is going to truly give you the ideal solution for all of that. And the reason why is whoever is best at those categories is best at selling those products. The service mechanism is fairly standard and across the board similar. There are some additional service requirements here and there, but for the most part, you’re going to go on site, maybe you do some auditing or some erasure, then you’re going to transport it back to your operations, you’re going to clean it up and you’re going to refurbish it and try to sell. And whatever you can’t refurbish, you’re going to recycle. ITAD providers make their money off of selling product and so I would love to go out and charge $20.00 an asset to actually make money off of providing those services than the people who are doing it for free because they’re going to take those dollars and pull it out of the value of the product. It’s kind of a shell game that ITAD providers take and you look at all the different revenue streams and you shift the buckets around to try to give the customer what they want to see from a pricing perspective.
So whoever is best at selling those products in the end markets typically is one you can win in those. So if you look at distributed assets, again PC, laptop, tablets, most of that stuff is getting refurbished and the really good stuff will get sold through Amazon and eBay and all those different B2C direct channels, some people will have their own kind of e-commerce sites which may move some stuff, but you’re never going to get anywhere near the traction or eyes on your website, no matter how good you are compared to Amazon. It’s worth paying the 8% or 10%, period. So most of those kinds of distributed and consumer type devices are sold there.
When you get into the data center, it’s a much different type of customer. You’re going to have you a Tier-2 data center who wants to buy a refurbished 2-year old hardware. They might buy some Cisco products or some white labeled servers. Or maybe they want to upgrade the RAM so they’re going to go on and try to find RAM that’s coming out of the hyperscalers, for example.
If you are a small-to-medium business and you need to buy some 3-year-old Cisco gear, well guess what, there’s no longer SMARTnet (this is a technical support service that gives IT staff direct, anytime access to Cisco experts and Cisco.com resources) or a warranty on that Cisco gear, so you’re probably going to want to buy that from someone who can sell it to you and put a third-party maintenance application of that. So that now you have a 1-year warranty that’s covered by Procurri or someone like that.
And then the mobility space, you’re going to sell some of those devices back through the channels to an Amazon or eBay, etc. But you know the customer support and the issues you have with selling mobile phones through those channels are difficult. So a lot of those products will go back through the guys who are true mobility players, they’re going to go on and refurbish those devices, maybe they’re going to sell those back to Tier-2 and Tier-3 carriers in the US. Maybe they’ll go to Latin America and the Middle East. A lot of the mobility products go back through Dubai and they’ll go into India, China or Hong Kong, etc.
So each one of those kind of verticals has different key buyers, where you are going to get the maximum revenue. So for me to be really good at selling laptops and PCs and really good at selling Cisco Gear and refurbished servers and really good at selling phones, that’s a big ask. That’s a very broad ecosystem to move into. And then obviously on the scrap side of the House, doing true recycling and owning these big shredding machines is a very capital-intensive investment. And you think about how things are getting smaller, less precious metals, right? You have to have a lot of material flowing through those to justify the operation of those things going 24/7 to pay for themselves. That’s why you don’t see a lot of real true ewaste shredders like an ERI, for example, versus guys who are just doing manual disassembly, then they’re farming it out from there, just like an ITAD would.
