By Sustainable Innovation staff | Dec 10, 2008

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Demand for pre-used PCs worldwide is greater than supply, but less than half of the machines in the secondary market will be re-used, says Gartner.

Only 44% of PCs entering the secondary market will be reused, a Gartner report has concluded. About one in five PCs will find their way from a mature to a developing market for reuse.  Export tariffs, high transport costs and legislation are slowing the market.

Gartner principal analyst Meike Escherich said the market offered good opportunities for intermediaries or resellers, but was "highly fragmented and competitive", with "tens of thousands of players involved".

"Unfortunately, an increasing number of laws based on the producer responsibility principle means that small players find it harder to compete with large vendors, which all need to resell a certain percentage of their secondary PCs," she said.

The financial return is quite attractive, she says. Refurbished PCs can deliver "equal or even better margin opportunities" than new PCs.

With an estimated profit margin on a refurbished PC of between $10 and $50 for a three-year-old machine, the economies of refurbishment rely on multiple PCs of the same configuration than individual systems, mainly provided by large and midsize businesses and government agencies.

But Gartner notes that the driver of the secondary PC market is software piracy. Hardware can be made inexpensive "if supplied without licensed software".

Branded PCs are also sought after because they may still display the original software license stickers, which provide some defense if checks into the authenticity of the software are made.

Microsoft's Vista OS and its demanding system requirements have been an indirect boost to the secondary market. The demand for new, more powerful PCs has resulted in an increased supply of secondary computers.

But high transportation costs, import tariffs and environmental legislation made it harder for low-volume players to compete, Gartner said. In addition the falling average selling prices (ASPs) of new PCs, and the increasing buyer preference for notebooks and most-recent specifications are threatening the current market.

The largest exporters of secondary PCs are North America, Western Europe, Japan and Australia. The fastest-growing demand is from the Middle East and Africa (MEA) and Asia/Pacific emerging markets, in particular China.

"The demand for secondary PCs in emerging regions, such as Eastern Europe, MEA, Latin America and parts of Asia/Pacific, is likely to grow as pressure increases on developing countries to accept used PCs as a viable technology solution for more basic computing tasks such as internet surfing and web email," said Escherich.