Re-commerce websites eye online second-hand opportunity
These reverse commerce firms are experimenting with business models different from those of online classifieds websites Quikr and OLX, which dominate online re-selling of goods
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Bengaluru: ReGlobe, Budli, YNew and ValueCart are just some of companies chasing the next big opportunity—sales of second-hand goods. They are reverse marketplaces or reverse commerce (re-commerce) companies that are experimenting with business models very different from those of classified sites such as Quikr and OLX, which dominate online re-selling of goods.
To win new customers and lure people away from online classified as well as offline stores, these re-commerce companies offer product specialization, a more scientific price discovery mechanism and higher convenience to bring the second-hand goods market online.
Unlike Quikr and OLX, re-commerce firms have designed software that helps determine product prices on the basis of set metrics such as age, wear and tear and market demand. Some re-commerce sites even guarantee products that meet some requirements.
A re-commerce company directly buys or facilitates the purchase of used gadgets from consumers. Some like Budli, ValueCart and YNew refurbish the products and sell them back online or in stores; others such as ReGlobe simply connect shoppers with second-hand product merchants.
“We offer price discovery and convenience for both buyers and sellers,” ReGlobe chief executive officer (CEO) Mandeep Manocha said. “You get to know about the market price for your product. You don’t have to wait as long as the product meets our quality requirements and you get the cash immediately at your doorstep. Our aim is to make selling as fast and easy as possible.”
ReGlobe expects to report monthly gross sales of $1 million by December, as it adds washing machines and refrigerators to its offerings. The company, which currently connects buyers and sellers of phones, laptops, tablets and air conditioners, will have a network of 1,000 buyers by the end of the year from 150 currently, Manocha said. The company raised an undisclosed amount of funds from Bessemer Venture Partners and Blume Ventures.
The market for second-hand products is potentially large. Second-hand smartphone sales by themselves may exceed $3 billion this year, according to estimates by industry executives. Smartphone sales in India nearly doubled to 80.6 million units in 2014, said Kiran Kumar, research manager, client devices, South Asia, at market research firm International Data Corporation. Anywhere between 20% and 40% of that may be available in the second-hand market, executives said.
Apart from selling to individual customers, re-commerce companies are also trying to sell to businesses. Budli, for instance, sells its wares to food delivery companies.
“Any company which needs gadgets for its employees or partners is a potential customer. We are looking at the B2B (business-to-business) segment becoming complementary to the B2C (business-to-customer) segment,” said Rohit Bagaria, founder of Budli, which claims to have sold products worth Rs.1 crore since January this year. The company deals in used smartphones, tablets and laptops and sells through its own website, a shop-in-shop store in Bengaluru and online marketplace eBay.
For re-commerce companies, logistics and sourcing of products are major concerns in scaling up as a large chunk of products come from individual sellers, which leads to inconsistency in supply.
To overcome this problem, both Budli and YNew are exploring tie-ups with e-commerce companies and distributors to get hold of returned goods. Budli, for instance, works with Flipkart and Snapdeal as liquidation partners for their product returns.
Hyderabad-headquartered YNew, which until recently used to accept only functional devices from sellers, will now tie up with distributors to get hold of handsets with repairable defects. “We will need a consistent supply in the long run. We will buy handsets from distributors, rectify the faults and sell them through sellers authorized by YNew,” said Dashradh Ram Nutakki, founder of YNew.
Re-commerce helps both customers and e-commerce firms by reducing wastage and utilizing goods that may otherwise have become redundant, said Anand Ramanathan, director at KPMG Advisory Services.
“They are adding value in taking ownership of goods which nobody wants. As long as there is an integrated model where businesses collect returns from e-commerce players, source from individuals and have buyers who are interested in returned and used goods, there are many revenue streams possible,” Ramanathan said.
Re-commerce also offers fatter margins compared with online retail, analysts said.
“With mobile phones, a retailer typically gets a 3-7% margin; re-commerce businesses will get about 15-20%,” said Nitin Agarwal, director at Equirus Capital, an investment bank. “They do value addition, refurbish the product, package the product and sell with a warranty. Hence, the margins have to be higher.”