Second-hand mobile phone company Flashback Technology ranks third in the industry: Why is it still difficult to achieve profitability despite annual sales of 1 billion?

The China Circular Economy Association estimates that in the past five years, China has generated more than 400 million discarded mobile phones each year on average.

Among these discarded phones, about 54.2% are kept idle by consumers, with only about 5% entering professional recycling channels.

The massive number of idle phones has opened up a vast market for the recycling of second-hand phones, creating an untapped treasure and promoting the development of the professional second-hand trading market.

Recently, the second-hand phone trade-in service provider "Flashback Technology" submitted its application to the Hong Kong Stock Exchange for the third time.

In 2024, Flashback Technology accounted for 1.3% of the Chinese mobile phone recycling market with a transaction volume of 1 billion yuan, ranking third in the industry, behind ATRenew (Aihuishou) and Zhuanzhuan.

Flashback Technology's GMV is less than one-sixth of that of the leading platform Aihuishou, and its gross profit margin is only one-third of that.

Due to insufficient profitability, the company's operating cash flow has been negative from 2021 to 2024, with a cumulative net outflow of 116 million yuan, and its operating capital mainly relies on external financing.

Before the IPO, the company completed five rounds of financing and signed multiple special agreements with redemption rights. Among them, the listing deadlines stipulated in rounds A, A-1, and C have not been met by Flashback Technology and have been postponed.

The key terms of the D-round preferred shares have now been extended to December 31, 2025. If Flashback Technology does not complete a qualified IPO by that date, the redemption pressure will further increase.

The urgency of this fundraising for the IPO is evident.

ToB Efficiency

Compared to trading platforms focused on second-hand 3C products like Xianyu and Zhuanzhuan, the public recognition of "Flashback Youpin" is relatively low.

In addition to the scale gap, a more critical reason lies in its B2B-like business model:

Flashback Technology rarely directly recycles idle devices from individuals but mainly connects with "procurement partners" to obtain old phones exchanged by consumers during the trade-in process.

These partners include physical retail stores of mainstream consumer electronics brands like Samsung and Xiaomi, as well as offline outlets of major mobile network operators like China Mobile and China Unicom.

In practice, Flashback Technology provides monitoring and pricing systems and corresponding training to the front-line sales staff of its partners, who then complete the quality inspection and operational processes for the old phones.

Therefore, in addition to the procurement costs of old devices, Flashback Technology also needs to pay a certain percentage of "promotion service fees" to upstream procurement partners and commissions to retail sales staff.

Additionally, it must bear the logistics costs incurred by third-party logistics service providers. As a result, it is still challenging for Flashback Technology to make a profit from the resale of second-hand phones.

Although the company has established the "Flashback Youpin" brand, its external sales targets are mainly downstream merchants rather than ordinary consumers.

The company classifies and packages the second-hand devices it procures based on their condition and functionality, selling them in bulk to downstream merchants, who then sell them to end consumers through their own channels.

In recent years, to improve operational efficiency, "Flashback Youpin" has also introduced a real-time bidding mechanism on its online platform:

The system automatically sets the starting price based on factors such as phone brand, condition, market recycling price, and target profit, and opens a limited-time public bidding for merchants lasting 2-3 minutes If the highest bid in the auction exceeds the starting price, the equipment will skip the standard quality inspection, grading, and pricing stages, and will be sent directly to the winning buyer.

In 2024, about 80% of the sales of Flashback Technology were completed through real-time bidding, with the average time from acceptance of inspection to resale not exceeding 24 hours for each device.

The streamlined process accelerates cash recovery, greatly improving turnover efficiency while ensuring cash flow. In the first half of 2025, the average inventory turnover days were only 6.5 days, better than the industry average of 10-15 days.

In the second-hand trading market where both supply and demand are highly decentralized, this model not only ensures a stable supply of goods but also achieves rapid expansion of the retail network in a short period with a light asset approach.

In 2024, Flashback Technology achieved revenue of 1.3 billion yuan, with a compound annual growth rate (CAGR) of 20.1% over three years. In the first half of 2025, revenue increased by more than 40% to 800 million yuan.

Flashback Technology has currently collaborated with over 75,000 retail stores from upstream procurement partners, covering 31 provinces in China, with an annual transaction volume exceeding one million units.

Fragile Alliance

Flashback Technology emphasizes that the "trade-in" cooperation with brand owners has established a mutually beneficial win-win relationship:

Brand owners can effectively promote new device sales and enhance user stickiness; while service providers can directly reach the brand's large user base, ensuring the supply of core goods.

As of now, Flashback Technology's cooperation map has covered mainstream consumer electronics brands such as Xiaomi, Samsung, and Vivo, as well as the four major mobile operators.

In 2024, Flashback Technology procured a total of 1.286 million second-hand consumer electronics through the "trade-in" channels from upstream partners.

If distributed among the 75,000 stores it covers, the average procurement volume per store is only about 17 units. For a single retail terminal, the effect of "trade-in" on driving new device sales is quite limited.

However, the root cause of the difficulty in maintaining such alliance relationships lies in the imbalanced market supply and demand structure.

Mobile phones are the most liquid and stable category in the second-hand economy. Devices of different conditions and models can quickly match buyers and achieve circulation.

High liquidity determines the scarcity of quality and stable supply sources.

For this reason, the core competitiveness of service providers lies in their ability to acquire and maintain stable supply channels.

Most mainstream second-hand mobile phone trading platforms are backed by platform giants: for example, Aihuishou with JD.com, and Xianyu with Alibaba, both of which have gained stable traffic support from giant ecosystems under equity binding.

What Flashback Technology lacks is the "Xiaomi system" as a single original equipment manufacturer.

In 2018, the company received nearly 100 million yuan in financing from Xiaomi Group and Shunwei Capital. Before the IPO, the Xiaomi system capital held more than 10% of its shares.

In 2024, the procurement amount from the top five "upstream procurement partners" accounted for 67.6%, with Xiaomi alone accounting for as much as 41.5%. On the sales side, Xiaomi brand mobile phones also contributed about a quarter of the company's revenue.

However, due to the significant disparity in discourse power in cooperation, mobile phone brand owners usually adopt a multi-source cooperation strategy when choosing service providers, rather than binding to a single partner Even Xiaomi, as the largest procurement source and shareholder of the company, is no exception.

In June 2022, Xiaomi launched its own centralized recycling platform, forming a competitive relationship with Flashback Technology. Previously, Xiaomi also led a $100 million Series D financing round for Zhuanzhuan.

To maintain market share, the company had to offer more competitive recycling quotes and front-end commissions.

Since last year, the continuous introduction and implementation of "trade-in" related policies have led to a significant increase in the number of relatively new high-end phones on the market, raising the company's procurement costs.

The market entry threshold for the mobile phone recycling industry is relatively low, and the industry competition is highly fragmented, with a CR5 market share of no more than 20%, resulting in fierce price competition.

Flashback Technology's core customers are mainly small and medium-sized merchants, who are highly price-sensitive and have limited brand loyalty, making it even more difficult to pass cost pressures downstream.

From 2021 to 2024, Flashback Technology's gross margin fell from 8.2% to 4.8%.

During this period, the company's revenue grew by over 70%, while adjusted net profit turned from a profit of 7.71 million yuan to a loss of 31.22 million yuan.

Still Awaiting Transformation

In the next three years, Flashback Technology plans to establish branches in Liaoning, Hebei, and Guangdong provinces to fill the gaps in regions such as South China and Northeast China.

Flashback Technology believes that the operating leverage brought by economies of scale will gradually be released, further driving the narrowing of losses. The increase in market share will help secure higher bargaining power.

However, the reality is that the current bargaining power with upstream and downstream remains relatively weak, and simply relying on scale expansion may still struggle to truly resolve Flashback Technology's profitability dilemma.

Over the past three years, the promotional discounts that Flashback Technology has advanced to mobile phone brand merchants for consumers have increased, leading to a continuous rise in accounts receivable.

To improve capital efficiency and control risks, the company is promoting the optimization of procurement channel structure to enhance overall operational efficiency and collection capability.

Non-core partners have been significantly reduced, with the number of active procurement partners streamlined from over 3,000 in 2023 to 1,808 in the first half of 2025.

In addition, reducing procurement from Samsung channels has decreased the accounts receivable from 287 million yuan to 94 million yuan, resulting in positive operating cash flow and a net inflow of 44 million yuan.

At the same time, strategic collaboration with the core procurement source Xiaomi has been further deepened.

In 2023, the company expanded its business footprint to the Hong Kong market, becoming Xiaomi's official partner for "trade-in" services in Hong Kong.

In July of the following year, Flashback Technology, as Xiaomi's strategic business partner, jointly conducted market research in Singapore, Malaysia, Thailand, and Indonesia.

Subsequently, in February 2025, PT Shanhui was registered in Indonesia to be responsible for overseas business operations, with Hong Kong serving as the regional headquarters for Southeast Asia.

The increase in the supply of mid-to-high-end products is expected to become an important opportunity to enhance profit margins on the sales side.

By June 2024, Flashback Technology reached a strategic cooperation agreement with three designated distributors of the Apple brand.

As of the first half of 2025, the revenue from the sale of second-hand Apple brand mobile phones reached 244 million yuan, surpassing Xiaomi for the first time Apple phones have always been one of the most liquid categories in the second-hand market.

For Flashback Technology, controlling a stable supply of second-hand iPhones means gaining opportunities to extend downstream and improve profit margins through direct ToC.

Flashback Technology is indeed preparing for this.

Flashback Technology stated that it will continue to increase its investment in the promotion and marketing of its own online platform and plans to settle on multiple mainstream e-commerce platforms, establishing specialized brand stores focused on mid-to-high-end second-hand phones.

At the same time, it will leverage short video content and live streaming sales to build a more diversified sales matrix.

The second-hand mobile phone market has vast potential and active transactions, bringing potential opportunities for industry participants. However, how much profit can be extracted amid fierce competition remains an unknown