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Reverse commerce

Gauging the exponential growth of Re-commerce in India

Gauging the exponential growth of Re-commerce in India
Image credit: Shutterstock
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

If you’re one of the many phone users, who want to upgrade to the latest Samsung S6 or iPhone 6 Plus, you must be going through a mental tug-o-war – Whether to spend Rs 50,000 on a weekend getaway to Thailand or on a new smartphone? Unlike the old days, where you forgot your old phones, laptops or tablets in drawers, or waited for them to get really outdated before handing-them-down to your maids etc, there’s a thriving market out there for used electronics online. This evolving Indian second hand market, which is now estimated to be worth in the vicinity of $3 billion (this is just for smartphones), has in the last 10 years or so come to be known as re-commerce (reverse commerce).

Industry Scenario

India’s electronic second-hand market has got on the bandwagon too and has been pretty busy of late and while most of the big eCommerce companies, along with few start-ups, now offer an exchange program for used gadgets, the truth is that they are latecomers to a party that got started a decade back.

Till eight-ten years back, the second-hand market in the country was primarily driven by local specialised second-hand markets like Gaffar Market in New Delhi, Lamington Road in Mumbai, etc. Growing aspirations of the middle class and the dream of upgrading to latest technology have fuelled second-hand sale and spurred the growth of the used electronic market. While the organised trade accounts for 5 per cent of the total volumes of sales, the unorganised trade accounts for the remaining 95 per cent.

Currently smartphone penetration is 10 per cent, while mobile penetration is about 55 per cent. About 45 per cent aspire to switch to a smartphone, and are looking to buy their first smartphone at a low cost and are attracted to second-hand markets for their consumption. The changing consumer lifestyle is also driving Indians to change their electronic gadgets very quickly.

Today, the average time a person takes to change his/her smartphone has come down from about 2 years to 6-12 months and hence, more and more used gadgets are reaching the re-commerce market. There is an unfulfilled need in the market for selling used gadgets quickly, with the ease of sitting at home.

Re-commerce Business Models

Three types of business models have emerged in re-commerce in India. On the one hand, companies like Greendust.com and Overcart have tied up with large OEMs/retailers and sell their factory refurbished or return inventory online or at their authorised stores.

The second model is companies like Budli and Karma Recycling, who directly acquire items from end sellers and resell them online. They use third party courier companies to pick up the item and money is paid after quality check (QC) at their warehouse, and then this inventory is sold through their store online. By paying sellers upfront, they can attract those customers, who value time and certainty over profit. By selling to end customer they have more profit realisation making it healthy business model.

The third model is a marketplace like ReGlobe that connects professional buyers and sellers and charges a transaction fee, but also assures home pick-up and payment guarantee. Hence the selling experience for consumers is instant and from the doorstep. By paying sellers upfront, they can attract those customers, who value time and certainty over profit. Focusing solely on this vertical, these start-ups can propose a unique experience to their customers.

Pros and Cons

Each model has its pros and cons. First model has attractive economics, but needs huge scale and capital. The second model raises logistical complexities and can get confusing. The marketplace model is dependent on the professional buyer network, which may become difficult to control at scale.

At ReGlobe, what has worked best in this model is the haggle free, convenient and privacy factor to sell your old gadgets to the professional buyers. The quickness of the whole transaction as they are matched with localised partners is an additional lure.

Currently buyers are selected in a very hands on manner through multiple channels—markets, online ads, and most popularly through referrals. They need to meet a checklist of criteria and are put through training. As these marketplaces grow, it will also become necessary to scale the process of inducting the buyer network without diluting the quality check and due diligence process.

It is not yet clear what model or what companies will win this space. What is clear though is that the market is huge enough for companies to evolve and experiment. Whosoever you are, there is somewhere an online company that can help you sell your old gadget easily and efficiently. So what are you waiting for?