Market Analysis: The Residual Value Loyalty Trap
Bring a bigger balance sheet...
Key Findings: Samsung's New Galaxy Club, launched in the UK in May 2025, offered customers a 50% residual value guarantee on Galaxy S25 and foldable devices. The programme was marked "currently unavailable" by October 2025 after approximately five months. Under IFRS 15, the guarantee triggers lease accounting rather than sale recognition, creating immediate balance sheet liabilities. With S-series devices retaining approximately 42% of value at 12 months and foldables around 25%, the gap between guarantee and market creates structural margin pressure. Analysis suggests the programme's pause was driven by accounting constraints rather than market failure.
Attending the CCS Insight Samsung event last week validated me banging on about the fact that device manufacturers would have to make bigger moves into the secondary market. Back in 2024 I was trying to figure out the new vs refurbished balance point1 and what OEM responses would be to secondary market growth which had for the most part, been left to, well, the secondary market2. By November last year it was clear to anyone rummaging through my CCS Insight Predictions series that manufacturers will need to spin up their circular flywheels quick sharpish and customer lifetime value might replace new device sales on management dashboards from Chertsey to Suwon.
For the avoidance of doubt, Samsung’s widely reported New Galaxy Club with its 50% residual value guarantee (RVG) pretty much telegraphed their intent in May last year3. But just as swiftly it disappeared under a “currently unavailable” label sometime around October 2025 and has remained so ever since4. It came to mind again at Samsung's broadside into the secondary market from my front row seat at their XP store in London's Kings Cross. If anyone can offer a forward residual, surely the OEMs have an advantage? Although, being reminded of a comment from an industry vet and subscriber a while back, as is oft the case, my curiosity got the better of me and down the rabbit hole I went. Coming?
New Galaxy Club
Launched in May 2025, the New Galaxy Club was initially open to the S25 series and extended in July 2025 to include the Flip7 and Fold7 devices. Consumers could join the club on Samsung’s UK website, Student & Youth Store and via the Enhanced Partnership Programme only and could optionally bundle Samsung Care+ at £179, though a membership fee could apply if the insurance was declined.
The guarantee offered the consumer 50% of the device RRP if upgrading between months 12-15 addressing Samsung’s market disadvantage of lower residual values. Eagle-eyed readers may note that the RRP price schedule as defined in the New Galaxy Club Terms and Conditions listed the Z-Fold7 1TB at £2,099 versus the retail launch RRP at £2,149. A genuine mistake, or did someone decide to bake a bit of arbitrary risk management into the small print with a residual value guarantee at 48.8% on Samsung’s most expensive device. The other difference may have been unintended, but the S25 Ultra storage labels are incorrect. Sloppy.
There were two payment methods, outright or 24-month 0% finance via Klarna with a 10% deposit up front. If the customer missed or chose to upgrade after the window, for finance customers, Samsung would settle whatever remained on the loan, although by month 16, ~67% would have been paid off the principal. The later you wait, the less Samsung pays out, obviously. Outright purchase customers would get “fair market residual value at Samsung’s reasonable discretion” which could be anything, no guarantee and a convenient escape valve for the programme.
In order to secure the RVG there were condition requirements. The device would have to power on, hold a charge and be fully functional. There could be no screen or back glass cracks and no liquid damage and as per usual, normal wear and tear was accepted. Surcharges for damage are listed by model in the table below:
There was a set of conditions defining unacceptable handset returns and an indication of timelines for the upgrade and return processing which identified the familiar MTR Group5 as Samsung’s partner. Aside from the labelling issue and the small matter of the Z-Fold7 1TB, the terms and conditions were transparent, including the exit provision in 14.5 which stated that Samsung, “may at our sole discretion choose to discontinue the New Galaxy Club programme at any point in time for new purchases without notice.”. Crystal.
Continue reading for:
Why IFRS 15 forced Samsung to treat New Galaxy Club sales as leases, not sales
The compounding margin trap: why loyal repeat customers cost Samsung more, not less
What retention rate Samsung would need for the programme to break even
Materiality analysis: how New Galaxy Club stacked up against Samsung UK’s financial thresholds
What a sustainable “Galaxy Club 2.0” might look like
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