This festive season, a new war will brew among e-tailers\u2014and this time, it\u2019s about share of wallet for refurbished products. Flipkart \u2014 which launched its refurbished marketplace 2GUD last month keeping an eye on its The Big Billion Days sale and in line with its affordability theme \u2014 has extended schemes on 2GUD such as debit\/credit card EMIs, easy returns, doorstep delivery and no cost EMIs. In fact, spillovers in the form of returned goods in mobiles and electronics during the festive sale period are likely to increase its market share, say experts. Horizontal player ShopClues, which clocked Rs 4.5 crore in sales from refurbished and unboxed electronic devices alone in July this year \u2014 including laptops, smartphones and tablets \u2014 gets approximately 65% orders from beyond tier I cities. It is expecting the number to hit 70-75% during this festival season. \u201cWe are expecting a five times uplift in sale during the festive season as compared to a normal month,\u201d says Ritika Taneja, head \u2014\u00a0 category management, ShopClues. Clearly, the refurbished category is getting more organised. \u201cThe market has normalised after GST. While horizontal players are in a better space, the bigger challenge now is competition,\u201d observes Anil Talreja, partner, Deloitte India. In fact, e-tailing in India currently stands at $25 billion and is poised to reach $80 billion by 2022. The refurbished category is estimated to be a $20 billion market in six years. \u201cThere are three key levers for this market \u2014 affordability, presence in vernacular languages and omnichannel. Refurbished is an important part of the affordability lever. It will bring tier II shoppers online,\u201d predicts Ujjwal Chaudhry, engagement manager, RedSeer Consulting. The refurbished category is mainly present across offline channels today. However, large horizontal players are in a good position to drive this category as they have a high trust quotient compared to smaller players, opines Chaudhry. Additionally, online channels will be able to provide better selection and offers compared to offline. Building efficiency Flipkart\u2019s 2GUD aims at having a separate platform for value buyers. Its launch as the first choice for quality refurbished goods allows Flipkart to focus on acquiring new customers in a different segment. It is using its learnings from eBay.in to offer certified, graded products, based on their physical condition such as unboxed like new, refurbished superb, refurbished very good, refurbished good and refurbished okay. 2GUD is a curated marketplace, working with sellers such as Rocking Deals, Zefo, Brightpoint and Yaantra. \u201cSellers can either sell on our platform post refurbishing or can use Flipkart\u2019s platform F1 Info Solutions for the same,\u201d says Chanakya Gupta, head of business, 2GUD. In addition, it does predictive demand planning to give feedback to sellers. \u201cWe are also working on a price mechanism so customers can compare prices of new and refurbished products,\u201d he says. On its part, ShopClues is working on creating the ecosystem for the refurbished category starting from sourcing, QC, packing and after sales service for end customers. \u201cWe will create our own channel for inventory management through a buyback process to manage supply chains. We are also in discussion with a big offline player to supply the stock,\u201d says Taneja. Are higher margins enough? While margins are higher in the refurbished category which lures players, the biggest challenge is unprofitable inventory and figuring out the cost to refurbish the product accurately at the time of acquisition. \u201cThere is only a 2-3% margin for the retail network in the new mobile business as compared to 15-20% in the refurbished space,\u201d says Dipanjan Purkayastha, CEO, HyperXchange, which sells premium refurbished smartphones both online and through 25 multi-brand stores. \u201cThe core competency in this business is a player who can sell both premium and non-premium. If you only sell premium, the acquisition price goes up. The purchase price matters a lot. In the refurbished business, the seller is the price maker,\u201d says Hitendra Chaturvedi, CEO, Green Dust. The company has moved away from keeping inventory and is now evolving into a services provider \u2014 a single point of contact to manage returns (return processing, repair, refurbishing and liquidation). However, for ShopClues, unprofitable inventory is not a big hurdle as it believes the overall category is profitable. Chaturvedi says inventory turnaround time should not be more than 30 days since new launches make the inventory obsolete. HyperXchange has built its own proprietary platform to estimate the repair cost at the time of inventory acquisition to ensure supply chain efficiency. \u201cThe largest hole in the margin comes from defective inventory. You might make a 25% margin on the top selling product but a negative 15% margin on a defective product. So this could wipe away the profit,\u201d Purkayastha concludes.