E-commerce giants Flipkart and Amazon are bullish on the nascent refurbished goods market in the country, with a special focus on smartphones and gadgets. Amazon is offering such products under its Amazon Renewed program, while Flipkart has a separate platform, 2GUD, for the same.
The refurbished market in India is mostly unorganised, but is witnessing rapid growth. Consider this: 14 lakh second-hand smartphones were sold in India in 2019 — a growth of 14% — according to Counterpoint Research. Industry watchers say that this trend is being fuelled by the diminishing product life cycles of smartphones — from three or four years to a year or two now — and more phones entering the refurbishment cycle as a result. It is estimated that automobiles, due to their high prices, command a 60% share in the organised part of this market currently, while electronics, including smartphones, have 25%, and other products such as home/kitchen products and apparels claim 15%.
Globally, the online second-hand goods market is flourishing. China’s second-hand market, according to NetEconomy, was valued at $100 billion in 2018. Alibaba, a formidable player in the market, has two refurbished goods marketplaces under its umbrella: Idle Fish and Xianyu. Idle Fish, reports suggest, has 200 million users and is valued at $3 billion.
Can Amazon and Flipkart leverage the evolving second-hand market in India?
Old is gold?
Amazon offers unboxed and refurbished products across 20 categories, including mobile phones, laptops, headphones, and home and kitchen products, through its Renewed program introduced in India in 2017. Lately, the company has increased its focus on this vertical. A year-end sale solely for Renewed products, wherein Amazon offered refurbished and unboxed products at discounted prices, was held recently.
Vivek Somareddy, director, seller services, Amazon India, says smartphones, laptops and headphones are the highest selling categories on the platform in India. “The growing phenomenon of customers upgrading their mobile phones in less than six months creates a supply of mildly-used products that can be refurbished to a like-new condition, and sold with a six-month warranty,” he explains.
Somareddy says the refurbished personal computer category saw a growth of over 300% in 2019, compared to the previous year, while the sales of headphones and kitchen appliances have quadrupled during this period.
Flipkart’s 2GUD, which primarily caters to tier II and III markets, is ruled by mobile phones, laptops and audio products. Chanakya Gupta, head of 2GUD, says the platform has served close to a million customers from over 3,000 cities across India, and has over 1,000 registered sellers. 2GUD offers a warranty of three to 12 months, depending on the product category. Both the marketplaces stress on quality checks of the products.
Getting it right
The second-hand goods market in India already has the presence of players such as Quikr and OLX, which operate on the customer-to-customer (C2C) model. However, these players have been veering towards a vertical marketplace model — OLX is focussing on the auto segment, while Quikr on real estate, to drive growth.
Experts say that Amazon and Flipkart have a good chance of succeeding in the refurbished market because of their business-to-consumer (B2C) model, and their strong infrastructure — something the C2C players lack.
Both OLX and Quikr have been battling with fake products and scams on their platforms for some time now. Ankur Pahwa, partner and consumer internet leader, EY India, says, “A B2C model will be an advantage for marketplaces as the vendor or the seller will have to take the responsibility of the products being sold.”
Ajay Gupta, partner at AT Kearney, cautions about the risks associated with the performance and quality of refurbished products, despite the requisite quality checks. “If customers start getting dissatisfied, then it could rub off on the main business too.”
Amazon and Flipkart will also have to build supply chain capabilities around these products to ensure a smooth run.
Besides, ensuring that these products don’t eat into their primary business is critical. “For every new phone that they are selling, there is also an old phone in the refurbished segment which is cheaper; they will have to figure out a way to balance this,” Pahwa adds.