Opportunities and challenges in the recommerce sector in India

4th Aug 2018
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Recommerce, or reverse commerce, is defined as “the recovery of products over electronic systems, such as the Internet, or through physical distribution channels”. Recommerce refers to a practice in which those who have bought products can “sell back” obsolete or otherwise unwanted products in exchange for cash or a different product.

The aspirational nature of the Indian consumer is what recommerce appeals to. Welcome to the ‘Statusphere’ – the feeling of status elevation by using a better quality/brand product or better features at a similar price point.

Image: Shutterstock

Benefits

The major benefits of dealing with a recommerce company are many, such as guaranteed repurchase price to the holder of the product. Most of them organize the logistical return of the product. In most cases, logistics costs are supported by the recommerce company, saving you from the hassle of answering numerous buyer calls and negotiation, maintaining privacy by not sharing/flashing your mobile number in the public domain, and assuring a quick sale and instant cash. The products they sell are reconditioned in a specialized refurbishing facility and are of high quality. The companies also responsibly recycle the waste.

The rise of refurbishing companies over classifieds

So far, online re-selling of goods was dominated by classified sites. The user experience while using online classified ads sites is poor – the seller does not know after listing his device when it will sell, at what price, the authenticity and genuineness of the buyer, price haggling, etc. People require a convenient, fast, and simple way to sell their used gadgets, which many times are just lying around losing value. Moreover, the traditional classified companies rely on advertisements or premium listings as their main source of income, which stands at less than 1 percent of the total transactional value that is being exchanged in a recommence industry.

The new recommerce startups are experimenting with different business models. They are trying to win over the customers of online classified sites by offering a more methodical price discovery apparatus and elevated convenience to bring the second-hand goods market online. They also help in determining the product prices on the basis of set metrics such as age, wear-and-tear, and market demand.

Opportunities

There is immense potential for recommerce in India. The recommerce industry in India is expected to witness a steep growth curve with a CAGR of more than 35 percent this year. As technology penetration increases, this need is going to explode in the near future. The options to sell these gadgets in a fast, simple, and convenient way and obtaining a fair value for them is limited. The second-hand goods market in India, especially used electronics, is primarily unorganized, with no company having even 1 percent market share in this multi-billion dollar sector. The churn, especially in smartphones, is extraordinarily high as these are being replaced every 15 months.

There is an unfulfilled need in the market which companies like Cashify, hyperXchange, and Yaantra are addressing. A large number of people have used gadgets.

Evolution of technology with new features and higher specifications ensures that consumers keep wanting to change their gadgets often. The vast number of first-time buyers who are upgrading from a feature phone to a smartphone find great value in refurbished smartphones. Students and technophiles who like to keep changing their gadgets also find more bang for their buck by choosing refurbished over new gadgets. Every smartphone is expected to go through three change of hands before reaching the end of its product lifecycle. As per a Deloitte report, the growth rate of the used smartphone market is forecast to be 4-5 times higher than the overall smartphone market.

On one hand, there is a huge untapped supply of used smartphones which are getting replaced. On the other, since India is an extremely value-conscious market, there is a huge unmet demand for devices in good condition at lower price points, from a trusted source, with quality assurance. Currently, there is no established brand in India which has been able to create a mindspace amongst consumers in this segment.

Challenges

The primary challenge for the recommerce sector is that it is mostly unorganized. The concept of refurbished gadgets is still quite new, and a layman is not even aware of the term ‘refurbished’. Most people in India have been used to dealing with the unorganized players where there is a lack of transparency, limited selection and availability, no quality assurance or warranty, and absence of clarity about the genuineness of the gadget. It is common for fake or stolen devices to be sold to unwary customers. The secondary transactions primarily happen through unorganized offline dealers spread across the country.

There is a huge market in the hinterland, especially in Tier-II and Tier-III cities. Every metro has a second-hand gray market which deals with second-hand electronics. Most of these are notorious for stolen goods. The fragmented supply chain and reverse logistics have been another hindrance for the growth of this sector so far.

Future of recommerce market

However, this is changing now with the growth of organized retail and ecommerce. With the growing popularity of recommerce among end consumers lusting after the almost-new, the industry shows tremendous potential to organize this unorganized sector.

The growth of the entire ecosystem in India makes it inevitable for this unorganized sector to be disrupted. The most important attribute required to avail this opportunity is focused execution. Operational efficiency, partnerships across the ecosystem, and optimal use of technology to converge trust, convenience, and value for money to consumers are what is required to succeed in this sector.

Considering the enormous growth of the recommerce sector in India going forward, it seems inevitable that pure recommerce brand(s) would emerge which would be identified with second-hand and refurbished gadgets. We are already seeing this happening in the used cars segment. Brands which are focused on new products would find it difficult to create the same impact since their primary attention would be on the new products.

India is today the world’s fastest-growing smartphone market. Out of almost a billion mobile phone users, only 300 million users are currently using smartphones. The estimated size of the smartphone recommerce market in India is over 100 million devices. Recommerce will undoubtedly be a catalyst in bridging this digital divide of 700 million. Technology is radically transforming education, healthcare, and financial services. The primary medium through which this technology is going to be accessed by millions will be the smartphone, the catalyst for creating change.

Recommerce has the potential to bridge this digital divide in India between people who have access to technology and those who don’t, while at the same time reduce e-waste and help save the environment.

Satanik Roy is the Co-founder of hyperXchange.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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