own your dream

November 26, 2016

According to the 2014-15  OLX CRUST survey, goods worth R56,200 cr are simply lying locked at people’s homes in the form of items which are no longer being used, across urban India*. This huge repository of used articles and the emergence of an aspirational consumer class have created a sustainable market for refurbished goods.

 

The term ‘re-commerce’ means commerce or trade in reverse—the goods go through the same process as when they were sold as new, but in reverse.

Surpluss, Gobol, GreenDust, and Overcart have become the leading players of over-stocked, unboxed, refurbished, and unused products using the smart
re-commerce concept. They have aligned with various leading brands and retail giants in channelizing their surplus or excess stocks and returned goods. At present, these companies are biting into the R20,000cr reverse commerce prospect by selling to customers in Tier II and III cities, along with deal-seekers in urban India.

The aspirations of customers are rising, but their disposable income is often not enough to meet their brand aspirations. In such a scenario, the re-commerce industry comes as a welcome relief. Also, what is significant here is that re-commerce companies are not selling cheaper brands, but making aspirational brands available at a cost lower than the market price. And the products range from clothing to electronics.

With the increasing demand for excess stocks (there is good response from those who have a liking for aspirational brands), the sector is expected to grow manifold in the coming years. Furthermore, the mobile phone category, specifically in the un-boxed and returned goods market, is expected to grow 30% every year till 2020.

 

Indian scenario

The market today is flooded with customers with an acceptance for surplus stock. Tier II and III cities are responding quite well to excess inventory goods, and companies are witnessing a rise in demand from the metros too. At present, the demand percentage from the metros and other cities is in the ratio of 40:60.

Let us look specifically at the category of refurbished electronic goods. Today Indian market offers brand new as well as second-hand products. And in between is the upcoming market of refurbished electronic goods. What attracts consumers is quite simple—it is the ‘price factor’. Goods are available at half or three-fourth the price of a brand new product or a sealed one. In fact, it is as good as new as it comes with the seller’s warranty, instead of the manufacturer’s warranty which is a plus point. As per industry estimates, mobile phones sell the maximum constituting 50% of re-commerce sale; large electronics items such as refrigerators and air-conditioners follow at 40%; IT products and other products comprise 6% and
4% respectively.

 

driving factors

Economic growth leads to the generation of surplus or excess inventory, and re-commerce is offering a mode of channel besides the traditional to get rid of this. Also, although their incomes may have increased, many people do not have enough disposable income to buy the ‘wish list brands’ they aspire for. Re-commerce companies that offer such brands at low prices bring along a ‘wow factor’ for such consumers.

Another important aspect is how these companies incorporate transparency into their operations, which is indeed a smart move as it helps them build loyalty. Customers know exactly what they are paying for, be it ageing inventory, open box, or refurbished goods. This leads to satisfaction and they become repeat customers.

They also offer the same processes and advantages as ecommerce players—a host of products to choose from, delivery system, customer service, etc. The most attractive factor is undoubtedly the fact that customers receive products as good as new at a the low price and the customer experience is the same at a lesser amount. Also, improved access to internet makes it possible for apprehensive customers to compare the prices online. Moreover, there are no middle men involved in the system and hence the profit directly goes to the re-commerce firm.

Lastly, the web is proving to be an excellent mode for re-commerce as it facilitates companies’ sale of surplus goods in no time, even in the absence of a physical store.

 

shortcomings

Due to the extensive changes it brings about, the re-commerce industry poses certain challenges. For manufacturers, the re-commerce cycle underlines the need to think about the end of a product’s life cycle. It is a globalised world, and a product travels to different geographic locations. This raises the issue of relationship between those who manufacture a product and those in charge of repairing it.

This new business trend makes it necessary for operators, wholesalers, and distributors to think about how to put together their offerings, and of their relationship with the mature market they will have to deal with.

 

conclusion

It is estimated that the return rate in ecommerce is about 15%, which means an approximate return of $17 billion worth of items. Hence, there is no doubt that as ecommerce in India would grow, the market of surplus goods will grow concurrently. Today, organised players in this market such as Surpluss, Overcart and GreenDust, who were early entrants, have been doubling their growth since inception.

 

HS-Bhatia,-MD,-Surpluss