1. Finding gold in junk: Realising huge potential of used and refurbished goods, e-commerce players eyeing untapped market

Finding gold in junk: Realising huge potential of used and refurbished goods, e-commerce players eyeing untapped market

Indian homes are sitting on a huge stockpile of unused goods— items that they no longer require and which can be liquidated to buy items that are more relevant to them.

By: | New Delhi | Published: May 14, 2017 2:51 AM
A few years ago, people didn’t actively think about unused goods and stocking, but now they do.

Consider these figures: Indian homes are sitting on a huge stockpile of unused goods— items that they no longer require and which can be liquidated to buy items that are more relevant to them—worth a whopping Rs 78,300 crore, as per a study undertaken by used goods marketplace OLX last year. The amount is eight times the budget allocated for the Centre’s Swachh Bharat Abhiyan, notes OLX.

So definite and compelling is the potential of this used goods market that OLX decided to coin a term, ‘brown money’, representing the value locked in these items. “In my initial years at OLX, I was often asked the size and potential of the used goods market in India. I used to have no answer because there were no public estimates. Three years ago, we decided to change that by instituting the ‘Consumer Research on Used Goods and Selling Trends’ (CRUST) survey,” says Amarjit Singh Batra, CEO, OLX India.

The CRUST report for 2015-16, prepared by OLX in association with market research firm IMRB International, found that, on an average, every Indian household stocks 12 clothing items, 14 kitchen utensils, 11 books, seven kitchen appliances, two mobile phones and three watches that they no longer require. “The emergence of consumer-to-consumer (C2C) online classifieds in the country has led to greater awareness about unused goods. A few years ago, people didn’t actively think about unused goods and stocking, but now they do. That’s the primary reason why we see stocking figures moving up. Consumerism is another reason why stocking is increasing despite selling rising,” explains Batra.

Realising the potential of the segment, online marketplace eBay India launched ‘eBay Choices’, a campaign that allows shoppers to choose from a variety of new, refurbished and used products, in August 2015. “Customers not only have the freedom to make a choice, but also compare prices and purchase accordingly. Through eBay choices, consumers are also presented with genuine products, which are certified, tested and backed by warranties,” offers a spokesperson of eBay India.

The campaign was so well received that within a span of three months, the category observed a growth of over 200%, as per eBay India. In the same time span, the category grew from 6,000 listings to over 25,000 listings. “When the campaign took off, around 2-3% of our GMV (gross merchandise volume) was from the refurbished category.

The refurbished and used category has been experiencing exponential growth now and contributes to about 15-20% of the total GMV on the site,” adds the spokesperson.

Growing market

As per OLX’s CRUST survey, the size of the unused goods market in 2014-2015 was `56,200 crore and a year before that, it was `22,000 crore. Indians are not known for selling unused items. There are several psychological reasons like emotional attachment and a ‘will-use-some-day’ attitude. However, trends are changing. A lot of people are selling unused items online, including high-value ones such as mobile phones.

So naturally, as the tide of previously-owned goods hitting the market grows, more and more e-commerce platforms are offering such goods alongside brand-new products.

In October 2015, managed marketplace ShopClues started the ‘unboxed’ phone category on its platform. These are items returned to sellers and later resold on the platform. The response has been overwhelming. “Rebranded and refurbished items are experiencing a constant surge in demand. The concept of buying and selling used goods in India has an age-old legacy,” says Nitin Kochhar, vice-president, categories, ShopClues. “We have seen tremendous growth in our unboxed and refurbished categories.”

A few years ago, the market for used goods in India didn’t exist. “Now that the market exists, everyone can see its potential. So people will inevitably follow. A lot of companies that are looking to diversify their products and services will also find this space attractive,” says Batra of OLX.

Before e-commerce, buying and selling used products was a practice exercised exclusively among peers, and thus was a very time-consuming process and remained limited to the social circle of an individual. “With the rise of e-commerce, the prevailing idea of buying and selling used goods has helped the market attain a high degree of convenience with increased product exposure. Today, a used iPhone put on sale in Bengaluru can be purchased by someone living in Dehradun almost instantly. This was not possible till e-commerce platforms began to facilitate such transactions,” adds Kochhar of ShopClues.

So what exactly are used or refurbished goods? As per eBay India, the overall used or refurbished market can be segmented into three categories: a) new or unused refurbished inventory; b) used refurbished inventory; and c) used inventory. “As the e-commerce sector continues to grow in India, the return rate of goods will also significantly increase. It’s estimated that of all the products sold online there are approximately 10-15% returns. Hence, the new or unused refurbished category largely consists of sales returns or dead-on-arrival inventory. Some of the inventory also comes from demo devices that brands use to promote their products,” says the eBay spokesperson, adding, “Consumers tend to dispose of their older versions of products to recyclers and refurbishers. These refurbishers then conduct a multi-point quality check and then refurbish them with genuine OEM (original equipment manufacturer) spares and introduce these products back into the market as used refurbished products.”

The third category—used inventory—is primarily a C2C segment, where the buyer sells the product. This product inventory is largely available on classified sites.

On the move

Categories that were being traded only offline or on vertical marketplaces a few years ago are the biggest ones for horizontal marketplaces today. The auto sector is one of them. For instance, in the auto category, OLX is six-seven times bigger than other online marketplaces. “Auto (cars and motorbikes) is our largest category, generating 45% of page views. In the coming years, we will see this trend for other key categories as well. Apart from being the number one marketplace for cars, OLX is also the biggest marketplace for mobile phones, furniture and motorcycles,” says Batra of OLX India.

“Better business opportunities, greater inventory diversification and higher profit margins are the three main reasons why several e-commerce players in India are now venturing into the used/ refurbished goods market,” says Sandeep Aggarwal, founder and CEO of Droom, an online marketplace for buying and selling used vehicles. “Talking specifically about the automobiles industry, latest reports indicate that there are 130 used cars sold for every 100 new car transactions in India, while 160 pre-owned two-wheelers are bought for every 100 new two-wheelers,” he adds.

Used goods make perfect economic sense too, both for the seller and the buyer. While new goods often give a margin of 2-3%, the same product—when sold as a pre-owned item—can fetch a margin of 7-10% on an average.

Used goods sellers on e-commerce platforms also witness a higher inventory movement for pre-owned goods.

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“The concept of buying used goods fits in perfectly with the price-sensitive, value-for-money approach of the Indian consumer. Shoppers are able to buy products at a fraction of their original costs, allowing them to own desired goods without disrupting budgets. Moreover, with the entry of several players in the market, most used goods nowadays are also verified for quality, ensuring that buyers get the maximum value for their money. This has led to a win-win situation for both buyers and sellers,” says Aggarwal of Droom.

From a revenue of nearly `900 crore from 3,400 transactions in 2015-16, Droom is targeting `15,000 crore by the end of 2018. “With a 12% annual growth, India’s automobile sector is expected to expand from $125 billion now to $250 billion by 2020,” Aggarwal says.

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