Industry Trends And The Future Of Independent Repair
It's an interesting time to be a cell phone repair technician. A lot of things are happening quickly, and changes are ongoing. I expect more of this as time goes on, and I wanted to take some time to discuss with all of you the implications of what I'm observing.
Most of you who know me might recall that 7 years ago, in 2013, smartphones were somewhat of a new technology. At that time, they had only really been around for a few years. 4G LTE technology was only about a year and some change into its life. The most popular phones were the iPhone 3GS, 4, and 4S. The 5 was just coming online, the iPad was in the 2,3, and 4 series. Samsung was rocking the Galaxy S2, S3, Note 1, Note 2. Blackberry was still out there, and upstarts like LG, HTC, and Nokia were all competing for a piece of the action. Overall it was still an emerging technology in many ways, and repair was following that trend.
Since that time, the devices have matured, and we are now dealing with technology that is light years from that period. We have facial recognition, OLED displays, 5G, incredible cameras, and all sorts of high technology. And like 2013, the repair industry has followed the trends. What I can say definitively is that repair is a vastly different business now compared to back then. So the future of it is very much in transition at this time, and I'd like to discuss the trends.
The first thing to realize about repair is that the barrier of entry is much higher than it was back in 2013. Back then, you could pick up something like Inc. Magazine, or look online at any of the small business idea sites and phone repair was at the top of the list for great business ideas. You could literally buy a few hundred dollars in tools, set up shop in your basement, and have a functional small business. As you grew, you could maybe open a shop somewhere, and for all intensive purposes the cost of entry was dirt cheap. Now? totally the opposite. Anyone who tells you that starting a phone repair business with that model is a good idea, I can tell you that's bad advice. Everything is changing, and much has changed already. Simply put, this is no longer a micro-business you can start out of your home. It's matured tremendously into a heavy retail model.
What specifically has changed? On the technology front, the devices are far more expensive and complicated to deal with than they once were. Back in the iPhone 4 days, for example, everything was screws and plug-ins. Now? You have EEPROM read/write, serialization of components, encryption, and all sorts of blocks built in by the OEMs to limit who can repair your device. The OEMs themselves do not offer much, if any, support beyond their own internal operations and chosen providers. Independents are left out in the cold in many cases. I have been able to keep up through the iPhone XS series, but the 11 has a whole new layer of encryption that so far hasn't been resolved by the aftermarket.
To explain what is happening, it's best to use an example from the past that mirrors current trends. Most of you currently obtain your prescriptions and pharmacy-related items from a chain, like CVS or Walgreen's. What is important to realize is that it wasn't always like this. Up until the mid-1990s, the retail drug business was served by a lot of small independently own drug stores. These stores did very well, and were quite common in small towns. My first job was in one of these establishments. But as most of you know, those little independent drug stores are all but gone. There are a few here and there, but not many. The one I worked in was bought out by CVS in the mid 1990s.
What happened to these stores? The large chains killed the business. Companies like CVS and Walgreen's bought out many of these stores, as well as smaller regional chains. As they grew and their sales volume escalated, the drug companies and insurance carriers began moving their business away from the independents, offered deals to the chains that weren't even offered to the little guys, and in one case, that being CVS, they became an insurance carrier with their purchase of Caremark. Many people could not even get their prescriptions filled at the independent store because their insurance wouldn't pay for it. They had to go to CVS or Walgreen's. Over time, the independents became less and less able to compete and eventually they died off.
That, in a nutshell, is what's happening in phone repair. There has been an activist movement called "Right to Repair" that has been going around lobbying state legislatures to pass laws that compel companies like Apple to even the playing field, but so far it hasn't been very successful. They cite a similar auto repair law in Massachusetts as a basis for their cause. Their position is admirable, but auto repair is a different business than phones. While auto repair has some components of retail, most independent auto repair shops are just that, a shop. They are not a retail establishment. Phones are predominantly sold through the retail channel, and repair has followed that path. Retail is a very complicated and expensive business model, and it favors larger entities over smaller ones.
So while "Right to Repair" might be successful, it would be tough to prevent consolidation like we had in retail drug, and clearly that is what is going on now. As much as people criticize Apple, they're not the only ones doing it. I can buy genuine Samsung parts, but often they're marked up to prices higher than what they do the entire repair for themselves. So as you can see, the OEMs are following an almost identical model that the health insurance carriers and pharma companies followed back in the 1990s. And like CVS, one of the chains in phone repair, uBreakIFix, is a franchise owned by Asurion, who is, wait for it, an insurance carrier. They are also a Samsung Care repair center, which means they are repairing at Samsung's prices, which are much lower than mine. Even Apple has recently granted them access to their systems that the independents have no chance of acquiring.
So the bottom line is that the industry is consolidating into larger business entities. "Right to Repair" appears to only be accelerating this trend. Even if legislation is passed, by the time it happens and the dust settles, the big guys will have the business locked down. Yeah, a company like CDC might have access to the tools, but it would be nearly impossible to compete with the large chains. That's where things appear to be going, and while disappointing, it's reality. This trend has occurred in just about every retail business out there since the 1960s, and it will continue.
As far as CDC and the future? Well, that's an interesting situation. I'm someone that understands fully that no form of business is ever permanent, unless you're maybe an undertaker. So the key is not to panic and continue offering the service I offer for as long as possible. In the mean time, it's crucial to look at evolving the business into other arenas. The few independent drug stores in business these days have done it through selling home healthcare items like canes and crutches, and so forth. I need to look at a similar path. Phones are one type of electronic device; there are many others out there where my skills would be valuable. So we'll see how that goes, but clearly that's something to look at seriously in the upcoming months.