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Nov, 12 2013

Scoring success by the “Seconds”

In India, the surplus electronics industry is worth around Rs 6,000-12,000 cr. With growth rate pegged at about 15% per annum and the market largely unorganised at present, the industry is wide open for new participants. Read on to know how you can be a p

The market for surplus goods, end of life, seconds and carton damaged products is in the nascent stage in the country. With not many organized players present in the segment currently, most of the end consumers are oblivious to its existence. It was this need and desire to create awareness among the consumers and build an organised market that led to the emergence of brands offering surplus electronic goods. With this concept gaining momentum, brands like GOBOL and YNew were able to provide a platform for re-commerce and generate a buzz around such goods; within a short span of time.

“We strongly believe that if we create a platform where customer experience is same as buying new goods, there will be a strong acceptability from the consumers, and brands will get an exclusive organized channel. It is a win-win for both brands and consumers. While brands can sell such goods in a transparent manner, consumers can also have access to such products at great prices,” says Alok Mathur, Director and CEO, GOBOL.

The concept of re-commerce

The basic idea behind re-commerce brands is to provide a safe place for buyers to purchase branded and certified seconds products with service warranty and provide a hassle free platform for sellers to sell their gadgets at best prices.

“Seconds” refers to products that are manufactured with may be some scratches, minor packing damages but working fine. They are not inferior or used. Moreover, consumers get the same warranty for such products as they would get for new products. Certified by manufacturers, they are fit to be sold.

Growth drivers

According to the industry players, the growing Indian middle class and rising disposable incomes are the main growth drivers of this sector. The craze of owning a renowned brand is also catching on, fuelling the demand for branded gadgets. Given these factors, market players envision an even brighter future going further.

According to a 2007 McKinsey report titled The Bird of Gold: The Rise of India's Consumer Market, there are five segments of households based on their incomes. The globals who are the super-rich elite; the strivers and seekers that constitute the middle class; and the deprived and the destitute.

The report says that as millions of deprived households move into the aspirer segment (almost 41% in 2007); they will begin to be able to afford products and services beyond their immediate needs for food and clothing. These aspirers are most likely to turn to the seconds and second-hand market to fulfill their desires.

Predicting that more than 25 million units of TV screens may enter the secondary market by 2015-16, Dashradh Ram Nutakki, Founder and MD, YNew says, “Buying and selling of used products is a proven business model as shown by the car industry. Our research shows that electronics will be the next big industry in this sector, given the penetration in the Indian consumer space. Smart phones, computers and televisions will do very well in this market. These gadgets are replaced and/or upgraded faster than any other electronics given the nature and frequency of their usage. Gadgets freaks and top of the pyramid consumers will drive the supply side of this business and there is a huge aspirational buyer market to own branded lifestyle gadgets at a value for money.”

Franchise opportunity

Having observed and researched the Indian consumer behavior, industry players realized that the Indian customer is more convinced about a product by 'touching and feeling' it, physically holding it rather than just looking at it online. Hence there's a need for brick-and-mortar stores.

For the same reason, GOBOL (Go BIG on LIFE!) started franchising earlier this year. Launched in 2012, Gobol is a business unit of Attero Recycling (an end to end electronic asset management company).

The brand owns a flagship store, has 10 franchisee-owned outlets and an e-commerce website. With their flagship store breaking even in just two months of its operations and the brand receiving encouraging response from customers, manufacturers and dealers, GOBOL decided to expand its footprint in the country. Looking for suitable franchisees, the brand promises all support to its associates.

“Our franchise is an all weather business opportunity in the fast growing consumer electronics space which helps the franchisee earn healthy returns while the consumers save money,” says Mathur of GOBOL.

Elaborating further on the support provided to the franchisees, Mathur says, “Franchisees may face issues with regards to setting up consumer electronics store. We'll assist them at every juncture from site selection to legal compliance assistance to staff selection and monitoring the growth of the business. Marketing support will also be provided. We have a round the clock online support cell as well, which is dedicated to the franchisees.”

Another opportunity to enter the market comes from YNew, which sells gently used second hand lifestyle gadgets and targets both sellers and buyers. Its pilot store has been in operation since April this year.

Ensuring zero channel and territory conflict with its associates, Sloyd (parent company of YNew) licenses the copyrights and trademarks of its brand systems to the franchisees.

“We treat our franchise partners as 'Grown-ups' (next version of Startup) who will leverage our brand system in order to roll-out the brand in local market and strive together for its success in the designated territory,” says Nutakki of Ynew.

Aiming to clock in revenues of Rs.100 cr by 2016, YNew guarantees full support to its franchisees. “Sloyd is investing in building a 'captive eco-system' for every brand it launches, which is much more than regular training & support; to help meet the objective of achieving higher unit success rate and growth in profitability of the franchisee units,” explains Nutakki.

Challenges

While the industry looks quite attractive, there are challenges to be aware of. Since the industry is still not completely organized, there is lack of regulatory framework. Industry players opine that non-availability of skilled/trained resources also poses a challenge. The market is highly fragmented and also price sensitive.

“Absence of business ecosystem and difficulty in finding business automation solutions needs to be taken care of”, says Dashradh Ram Nutakki of YNew.

Alok Mathur of GOBOL further adds, “The challenge for the franchisees is to be able to retain the customers and keep updating them about the new products that have come in. Servicing the clients regularly and being in touch with them is the only way to win their loyalty.”

Growth drivers

  • Growing Indian middle class
  • Rising disposable income
  • Trend of owning a brand catching on

Challenges

  • Unorganised industry
  • Lack of regulatory framework
  • Non-availability of skilled/trained resources
  • Fragmented market
  • Price sensitive market

What do they mean?

Factory Seconds: Factory seconds include brand new and unused electronics that are priced lower because they might bear some minor unnoticeable cosmetic blemish.

Surplus: The surplus electronics product range includes those products that have been superseded by newer versions or have turned obsolete. Such products are absolutely brand new and unused.

Carton Damaged: This product range includes items, which had their cartons damaged during transit. Such products are in perfect working condition, absolutely brand new and unused.

Refurbished: Refurbished product range includes items that have been restored to proper working condition and have undergone a rigorous quality check.

Franchise facts

Brands

Investment

Area ( sq ft)

Breakeven

RoI

GOBOL

Rs 20 lakh

600-1000

6 months

50%

YNEW

Rs 15 lakh     

500-600

12-18 months

36%

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