As salaries fail to keep pace with dreams and aspirations of the people, selling used products in India – such as watches, shoes, apparel, mobiles, laptops, including various high-end luxury products – attracts an enormous demand. Online sellers are chasing the next big ‘second-hand’ opportunity, the sale of second hand products.
For perspective, the classifieds industry that stood at Rs 1,800 crore three years ago in 2013, is slated to grow to Rs 4,500 crore by 2018, according to a Deutsche Bank report. While the figures show evidence of a barmy growth (a CAGR of 20 per cent), the numbers don’t validate even one-third of the total opportunity there is: according to an OLX survey released for years 2014-15, Rs 56,200-crore worth of goods lie idle, opening scope for a massive opportunity. What’s more, these survey figures only give a picture of 16 cities! The pie, therefore, is not small and the new entities smell an opportunity.
And the space sure is getting saturated fast, with players squeezing into classifieds market by way of varied categories such as fashion apparel, mobiles, shoes and watches, and other CDIT products, albeit in a more mainstream avatar.
According to a recent industry report, OLX and Quikr now hold 60 per cent of the industry’s market share to other players’ 40 per cent. Approximately 30 million consumers and SMBs across over 900 cities use the latter’s online portal to buy, sell, or rent out products and services in a variety of categories such as real estate, auto-motors, jobs, household goods, services and electronics. Pranay Chulet, Founder and CEO, Quikr says, “There will be more specialised eCommerce companies to look out for in the coming years. The fun has just started in this space.”
Business models beyond OLX, Quikr
The reverse marketplaces or reverse commerce (re-commerce) companies entering into the ‘re-selling of goods’ space have different business models from market biggies such as OLX and Quikr. Inclusions like price discovery mechanism, product specialisation, and basing the prices of products on metrics such as year of make, market demand and wear and tear make them represent a dissimilar league, differentiating them from OLX or Quikr for used products. The two categories that clearly make a mark above others are ‘electronics’ and ‘apparel’. And hence, many start-ups are seeing entering the re-commerce through either apparel or electronics.
Pre-owned branded and designer apparel and renting garments
Within apparel, it is in ‘luxury apparel’ start-ups are laying greater impetus on, catering to the middle-class aspiration for luxury garments. Women can buy pre-owned garment at half its original price and rent a garment at approximately 10 per cent of its tagged price.
Companies such as Poshmark, Rent the Runway, Bag Borrow or Steal and The RealReal in the US and The Secoo in China have made it possible for companies like Envoged, Etashee, Stylish Play, Elanic, SwishList, Share Wardrobe, LibeRent and about a dozen more to come and try out the million-dollar opportunity in the pre-owned (and renting) branded and designer apparel segment. However, these are not the OLX’s of old clothes or accessories. Elanic, Stylish Play, Share Wardrobe and Etashee are among the prominent portals for pre-owned apparels in India, whereas start-ups such as FlyRobe, Klozee and LibeRent rent out premium fashion to users.
Although there is no reliable data on the market size of pre-owned fashion, of the $150,000 crore women’s apparel market, 6 per cent (approximately $10,000 crore) lies with this segment. In addition, a recent PriceWaterhouseCoopers (PWC) report states that the collaborative economy has the potential to increase global revenues to $335 billion by 2025, which in the coming time could open a sea of opportunity.
While pre-owned fashion has caught the attention of quite a few entrepreneurs in India, the segment is sporadically funded. Zapyle.com, which is competing with Elanic, raised $1 million in seed funding from a group of unnamed real estate firms and investment companies in Bengaluru. Envoged raised an undisclosed amount in seed funding led by entrepreneurs Ankush Nijhawan, Manish Dhingra, Gaurav Bhatnagar (AMG investments) and few other angel investors. Elanic, too raised a seed round of funding, led by Rebright Partners, a Japanese venture capital entity, based in Singapore, with participation of Tracxn Labs and entrepreneur Aneesh Reddy.
Nirali Vasisht, Founder, Rekinza, says that it is the mindset that needs a pull. “Buying pre-owned is not a concept that is widely accepted in India. Finding a way to change people’s mindsets and getting them to try pre-owned products has been a challenge in our journey.”
Although investors have not poured in funds generously in firms in this sector in India, about 12 online marketplaces in the US have raised about $230 million, according to Tracxn. That tell us that ‘Fashion’ is certainly not an early mover, what is, then? It is ‘Mobiles’.
Second-hand mobile phones, a category above the rest
The re-commerce companies like Budli, Togofogo, YNew directly buy from the consumer and sell them in their online portals or in stores. Some others, like ReGlobe runs on a price-discovery model, connecting shoppers with merchants dealing in second-hand products. Initially, ReGlobe had started buyback services only for laptops but soon started services for mobiles as well. Mandeep Manocha, CEO at ReGlobe says, “Mobiles are the driving force for majority of the businesses in India and we realised the potential that mobiles held in the second hand market.”
Thus, the company started buyback services for mobiles and now it also has Cashify App that offers automatic diagnosis for mobiles.
In the refurbished mobiles only area, the market size is expected to reach $14 billion by 2017, according to Gartner Research. Soumitra Gupta, CEO, Togofogo says, “This market is anticipated to reach $15 billion in 2020.” Togofogo’s Certified Preowned product is backed by superior refurbishment by Aforeserve, extensive quality check certification by Qutrust and one year warranty by Warranty Bazaar.
Some players like Budli also do buy back and sale to businesses. “We are working with large corporate houses, start-ups and SME’s. Apart from these, we have multiple other selling channels: Direct eCommerce, through online marketplaces (eBay), offline channels and mobile app launching shortly,” said Rohit Bagaria, Founder of Budli.
Aftermarket for devices (smartphones and tablets) is highly volatile given the inconsistent supply, unpredictable growth, unhealthy competition from unorganised players and lack of regulatory oversight. “Besides these industry challenges, re-commerce players are plagued with people challenges, higher operational costs and lack of technology solutions to automate their business processes. Being the early-mover, YNew is geared up to beat all these odds in order to build a sustainable and scalable business model for Indian market,” said Dashradh Ram Nutakki, Founder, YNew, which is currently eyeing to be an end-to-end reverse logistics player for smart devices (smartphones and tablets).
But, the problem of inconsistent supply is being dealt with tie-ups with eCommerce players. “E-commerce is helping us solve the logistics problem. We have developed multiple sourcing channels – both online and offline and today it is not an issue. We also work with the major eCommerce players to get returned and product exchange devices,” confirmed Rohit of Budli.
With ‘Mobiles’ at the second-hand products’ helm, the trends are clearly indicating the opening up of a mature market. As ‘Apparel’ and ‘Auto-motors’ are the other leading categories in the place, there’d be a definite increase in sales as awareness grows.