‘Re-commerce’ firms mend their way to profit

A handful of companies have found a way to make money by selling surplus, carton-damaged, ageing as well as refurbished goods. Unlike Olx or Quikr, these companies give a year-long warranty on most products, but sell them at less-than-market prices. GreenDust, Surpluss and Gobol are tapping the₹20,000-crore reverse commerce (re-commerce) opportunity by selling to customers in Tier II and III cities, along with deal-seekers in urban India.

These re-commerce companies buy goods from original manufacturers or big retailers, refurbish them if required, and sell further to customers.

“Both the incomes and the aspirations of people are rising. And when disposable income falls somewhat short of fulfilling brand aspirations, we step in,” says HS Bhatia, Managing Director, Surpluss.in.

“We don’t sell cheaper brands (from China), but we sell (aspirational) brands cheaper,” he clarifies. And the products on sale range from shoes and bags to clothes and air conditioners.

According to industry estimates, mobilephones sell the most through re-commerce, comprising about 50 per cent of the pie, followed by large electronics items such as refrigerators and ACs at 40 per cent, IT products at 6 per cent and other products at about 4 per cent.

Bhatia classifies goods sold through most re-commerce companies as ageing stock carried by manufacturers and retailers (mostly over 90-180 days old), and unused goods — whose boxes have been damaged in transit but product is new and refurbished — and goods which developed fault on first or second use and are repaired before being re-sold.

Hitesh Chaturvedi, who started GreenDust in 2008, says about 70 per cent of his business comes from Tier II and III cities. “That’s where the market is,” he says, adding that an emerging client segment is the environment-conscious youth, who buy refurbished goods as there is a green element to it.

But eager users lapping up big brands on discount are just one part of the story. The other is the dire need of manufacturers and retailers to manage returns. “They want someone to solve their problem of returns, and that’s what we do,” says Chaturvedi.

“We have created a separate non-conflicting channel for manufacturers to offload their overstock,” Bhatia adds.

What has given a fillip to these businesses is the advent of online marketplaces such as Amazon and Snapdeal and large retail chains such as Reliance, Wal-Mart and Metro, all of which generate truck loads of ageing inventory or items that can be refurbished.

“We started with home appliances, IT products, mobilephones and consumer durables, and have now added apparel, shoes and other softer goods,” Chaturvedi says.

Gobol currently sells carton-damaged, surplus, refurbished as well as factory-seconds mobilephones, laptops, tablets and other electronic gadgets online.

For GreenDust, about half the sales are made to repeat buyers; the figure is nearly 40 per cent for Surpluss. “These are people who are happy with the purchases and move on to buy more goods from us,” says Bhatia.

Each product in Surpluss’ catalogue is tagged as ageing, open box or refurbished. “The discount on ageing goods is 10-15 per cent, on open box about 20 per cent, and refurbished could be 50-60 per cent,” says Bhatia. GreenDust, which mostly is into refurbishing of goods, offers up to 50 per cent discount over MRP.

And it are these discounts that have helped the firms expand rapidly as buyers make a beeline for them. GreenDust has close to 300 franchisees, now, across India. Surpluss supplies to over 18,500 pin codes through its 28 warehouses across the country.

GreenDust has been profitable since FY15. Surpluss clocked a turnover of ₹27 crore in FY16, its first full year of operation. And in the first four months of this fiscal, it has a posted growth of 200 per cent.

Despite the rising demand from urban areas, Chaturvedi is not upbeat on opening GreenDust stores there.

“Urban centres are growing well, but opening up a large store in metros is not cost effective. The real estate and other costs are higher, making the business less viable,” he says.

And this is precisely why Gobol and Surpluss don’t have an offline presence — it is more economical to be just online.

But Surpluss has sensed an allied opportunity in the segment. Since a lot of the customers are buying in bulk and selling further, Surpluss is readying to launch a B2B website, Bizpluss.in, targeted only at businesses.

As Indian customers are turning out to be avid e-shoppers, it won’t be surprising to see them becoming re-commerce buyers, too, in the next few years.

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