As per industry estimates, new mobile phones fetch margins in the range of 3-5%, while margins on refurbished models can go as high as 10%.
While consumer electronics, especially smartphones, have been the ruling category mix for e-commerce companies with the largest share of gross merchandise value at about 48%, e-tailers like Amazon and ShopClues are exploring even better opportunity in the refurbished or pre-owned phone market in a bid to double margins. As per industry estimates, new mobile phones fetch margins in the range of 3-5%, while margins on refurbished models can go as high as 10%. The lifecycle of a smartphone in India has reduced substantially from two years to six-nine months, which has increased the traction for refurbished phones, which can be purchased at 65-75% of the retail price.
Says Hitendra Chaturvedi, founder and CEO of GreenDust, a company that sells factory seconds, that the return rate of mobile phones for e-tailers is 5-10%, which also includes the buyback or exchange programme run by the companies. E-commerce companies then tie up with third-party vendors who refurbish the phones. Apple, Samsung, Xiaomi, One Plus and Moto are among the top-selling brands in the refurbished phones category.
“We launched Amazon’s global ‘Amazon Renewed’ programme in January this year with mobile phones and laptops, which has got a phenomenal response, with 70% of our orders coming from Tier II & III cities. Amazon Renewed programme has become the destination for Indian customers who aspire to buy high quality aspirational products at more affordable prices,” an Amazon India spokesperson said.
E-tailer ShopClues is also focusing on refurbished items, mostly electronics. The refurbished category can fetch a commission in the range of 5-7%. “Most e-commerce players are operating in the refurbished segment via product return exchange offer (PREXO), where the company refurbishes phones that are either returned or exchanged by the customer to the marketplace,” said Nitin Kochhar, senior vice-president of categories at ShopClues.
Flipkart does not deal in refurbished phones, but industry observers suggest that the company will be exploring the refurbished market via eBay India, the company that it acquired in April. An e-mail sent to the company did not elicit any response till the time of filing this report.
Simply put, the refurbished market has not picked up in India owing to a trust deficit between the buyer and seller. But now with minimum warranty of three-six months offered on refurbished phones, the negative perception that people have towards these handsets has changed, said Chaturvedi.
Industry experts pegged the size of the refurbished mobile phone market at 10-20% of the total mobile market, but it continues to garner more customers offline from destinations like Gaffar Market in New Delhi, or Heera Panna in Mumbai. Meanwhile, online players like ShopClues, Amazon, Overcart, Gobol, JustLikeNew, Blubirch and Cashify contribute only about 5% in the refurbished mobile market.