The second quarter brought generally worsening business conditions for the ITAD industry, but business leaders think they’ve hit the bottom of secondary market pricing.
A survey by E-Scrap News and consulting firm Compliance Standards asked ITAD industry leaders about IT refresh cycles, competition, used device pricing, competition, hiring and capital investments, and more for the second quarter of 2023.
“Q2 started off strong but was negatively impacted by continued variability in the reuse markets,” one participant wrote (all responses remain anonymous). “This volatility continues to be our biggest challenge although we believe it is largely driven by sentiment rather than the actual strength or weakness of the market,” according to a second-quarter survey report.
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In the meantime, the following are some takeaways from the second-quarter report, which was provided exclusively to survey participants:
Business conditions were worse: Just over 63% said second-quarter business conditions were worse than the same quarter a year prior. During the first quarter, 56% had said they were worse year over year. The respondents also indicated things were worse than the prior quarter. Specifically, in the second quarter, 47% said business conditions were worse than in the prior quarter. During the first-quarter survey, 41% had said they were worse than the prior quarter. The same general takeaway came through from questions asking whether the number of IT refresh projects were up, down or flat year over year and sequentially.
Clients layoffs cited: A number of comments from survey takers indicated that their clients were experiencing layoffs, which was slowing business. “We are seeing more layoffs in the industry among the clients we represent with white glove services,” one respondent wrote. “Companies are being forced to take this action.” Another noted, “Many companies that initiated ITAD services RFPs, evaluations, etc., have let the individuals go who were leading the project.”
Device sales are hugely important: For the first time, the second-quarter survey asked participants about their sources of revenue. In aggregate, 40% of revenue came from the sale of used devices, 16% from sales of scrap and commodities, 14% from enterprise services such as premium data destruction, 12% from sales of harvested parts and components, and 19% from other sources (numbers total 101 due to rounding).
Big capital investments planned: Looking forward, poll takers said they’re looking to make big capital investments in their companies. During the second quarter, 33% said they plan to spend between $1 million and $5 million in capital investments over the next year, and the rest said they were looking at smaller expenditures or they didn’t know. That was way up from the first-quarter survey, when 11% pointed to $1 million to $5 million investments. Company leaders pointed to vehicle upgrades, additional facilities, equipment to remove chips, ERP software investments and other projects.
Secondary market pricing looks up: Knowing how important used device sales are to ITAD service providers, E-Scrap News and Compliance Standards asked about secondary market pricing. In these answers, there were bright spots. For example, in the second quarter, 33% of respondents said secondary market prices were flat or up year over year. That may not sound great, but in the first quarter, only 5% said they were stable or higher year over year. On a sequential basis, it was the same trend, with 54% saying second-quarter prices were stable or higher than the prior quarter. In the first quarter survey, only 20% said the same thing.
“Although we anticipate continued volatility in market pricing, we are hopeful that we’ve hit bottom and will gradually begin an upward trend,” one poll taker wrote.