Synopsis–The transition of pre-owned goods market from the unorganized to the organised sector in India appears to have had fruitful results last year.
Not very long ago, pre-owned and second-hand goods in India shared a somewhat questionable reputation and weren’t always perceived to be trendy. Reason? A large part of the second-hand market comes under the unorganised sector in India, which continues to suffer with a trust deficit. However, with online marketplaces giving visibility to these dealers and resellers, their shift towards the organised sector is making them more acceptable. Further, among the many surprising changes in buying behaviour we witnessed last year, the coronavirus pandemic changed the way people looked at pre-owned or refurbished goods. Be it the newfound and growing respect for the environment or measures to shop economically, Indians have embraced the many benefits of reusing.
Classified marketplace Quikr, which initially saw a muted response in the beginning of Covid-19 in India, saw positive signs of growth a few months later. According to Sarath Chandra Gudlavalleti, Senior Vice President and Business Head, QuikrBazaar, the company saw engagement levels across several categories exceeding pre-COVID levels in November 2020.
“While there was a lot of uncertainty in the industry when the world was first hit by Covid-19, environment-friendly and cost-saving benefits that pre-owned, refurbished, and unboxed products offer, played a role in the surge in demand,” Gudlavalleti told ET Digital.
Quikr, which acquired another refurbished goods marketplace Zefo in 2019, saw a 20% year-on-year jump in demand for home and lifestyle products and a 15% increase in electronics and appliances such as washing machines and refrigerators on Zefo in September-October 2020 compared to 2019. Whereas, QuikrBazaar witnessed a 37% year-on-year increase in the demand for Quikr Assured Electronics & Appliances and a 10% increase in Quikr Assured Furniture including study tables, sofa sets, bed sets, and wardrobes during the same period.
Gudlavalleti believes this could be in line with the need for home office setup/online classes and to upgrade one’s lifestyle. “Consumers spending more time at home now and therefore are looking to upgrade their lifestyle with budget-friendly options. Pre-owned, refurbished and unboxed products come with exciting options like no-cost EMI, warranty, discounts, doorstep delivery, product installation, demo options, buy-back options and they’ve become major trust drivers for users. Besides, they are 20-30% cheaper than new products and are good for the environment,” he said.
Since the world went into lockdown enforcing people to take their office and their children’s schooling at home, the e-commerce industry quickly latched on the opportunity to serve the home-bound customers. At the same time, as the economy nosedived, consumers saved money and look at more economical options.
Flipkart-owned refurbished gadgets store 2GUD could expand its reach to serve nearly 17,000 pin codes during the festive season. “2GUD also witnessed a 2X increase in demand for categories such as budget mobile phones, laptops, and audio devices as consumers opted for affordable products to meet their needs,” Chanakya Gupta, Vice President–2GUD, Flipkart told ET Digital.
High demand, low supply
For Cashify, which deals with used mobile phones, 2020 came with a lot of opportunities. As the pandemic led to the closure of schools, it marked the beginning of online classes at home. This led to a surge in demand for mobile phones, but a severe disruption in the supply chain of cheap smartphones from China meant the need for pre-owned gadgets sprung rapidly.
iStockThe second-hand market, which was largely unorganised earlier is becoming a part of the organised sector due to the pandemic.Saurabh Luthra, Head, Business Development and Expansion, Cashify told ET Digital, “Sellers in India depended a lot on China for cheap smartphones, but with the tensions among the countries, the supply and sale took a hit for some time last year. This happened when many people required devices for personal work from home or schooling from home. There was a significant shortage of new devices.”
This is where Cashify could drive the sale of pre-owned and refurbished smartphones on its platform. He added that a good amount of demand came from Tier-2 and 3 cities. During this period, the firm worked with many NGOs who were providing free used smartphones to underprivileged children.
Cashify, which is also labeled as a re-commerce platform, released its annual user behavior report on pre-owned phones last year for 2019-2020. Xiaomi took the cake in the list of top selling pre-owned smartphones accounting for 27% share, followed by Apple and Samsung both at 16% each and Motorola at 12%. It made the analysis from over 1 million users on Cashify’s platform.
The top metro cities- Delhi, Bangalore and Mumbai accounted for over 40% of refurbished smartphone sales. The report revealed that 32% purchased pre-owned devices to fulfill remote working requirements, and 26% for educational and other purposes of family members. It found affordability as the primary reason for buying refurbished phones. The Rs 10,000- 20,000 segments dominated the pandemic-driven purchase.
However, presenting a contrary set of numbers, smartphone trend tracker Counterpoint Research revealed that while demand for refurbished smartphones jumped, it wasn’t met entirely due to supply chain constraints.
“Sales of new and refurbished smartphones suffered in India in 2020 because of the pandemic. As the supply of new smartphones was hit, consumers kept their current smartphones longer, considerably affecting the supply of refurbished smartphones,” Glen Cardoza, Senior Research Analyst- Mobile Devices and Ecosystems, Counterpoint Research, told ET Digital.
The firm’s latest report revealed that the global refurbished smartphone market plunged by 9% YoY in 2020. Cardoza, in the report, stated that ‘key secondary markets India and Latin America saw 20% and 24% declines respectively during the first half of 2020 because of strict and extended lockdowns.’
He, however, said that it is not all a gloomy situation. Cardoza explains that although refurbished smartphone businesses saw a decreased supply and increased demand in H1 2020, they started capitalizing on the surge from May-June onwards. He added they saw an increase in the number of new businesses dealing in procurement/repair/resale of pre-owned smartphones in the country.
iStockWill the popularity of refurbished goods last, now that everything is going back to normal?This trend also falls in line with Apple CEO Tim Cook’s long-term plans for the mobile giant. In 2014, he had talked about trade-ins (i.e., traded iPhones to be resold for more price-sensitive consumers) and had said, “The secondary market is very key and we’re doing programs et cetera to increase that because we think we wind up hitting a customer that we don’t hit in another way.” In 2016, it launched a program selling refurbished iPhones worldwide. India, however, declined the proposal of opening an Apple refurbished store.
Economical ride
Amidst safety and hygiene concerns, Indians avoided public transport and cabs during the pandemic, most of which were not active for a significant period last year. This meant pre-owned vehicles also found their moment under the sun.
According to Gajendra Jangid, co-founder and CMO of pre-owned vehicle dealer Cars24, it has crossed the pre-COVID sales numbers and witnessed a recovery of over 100 percent in August 2020.
Cars24, which initially faced a dull customer engagement in the beginning of the lockdown, introduced home inspection services and got requests from over 50% of their customer base for the service.
“A paradigm shift is already happening where consumers do not want to buy new stuff. Pre-owned cars are the perfect solution not just for an individual, but an entire family to travel safely under budget. Plus the added benefits like warranty, on-spot loans, buyback guarantee etc, has resulted in an increased number of purchases, especially first-time car buyers,” he said.
The company has been able to buy/sell over 40,000 vehicles post lockdown. It also ventured into the pre-owned two-wheeler segment- Cars24 Moto and had procured over 1000 two-wheelers within three months of its launch.
According to Deloitte’s recent survey, 75% of Indian respondents said that they were planning to keep their vehicle longer than expected during the Covid-19 period.
Rajeev Singh, Partner and Automotive Sector Dealer, Deloitte India, said that the growing sale of pre-owned vehicles last year was seen with a significant participation from Tier 2, 3 cities.
“In the small towns and cities, most of the pre-owned market fell in the unorganized sector. However, this is all coming in a structured manner and with the rise of online marketplaces for used car dealers, the players in the unorganized sector are moving to the organised sector. It is getting a wider audience and visibility and therefore, as the consumer activities and buying behaviours evolve, so are the dealers in the semi and unorganized sector,” Singh said.
The sale of pre-owned vehicles shot up as people were wary of using the public transport.Growing reuse movement
As 2020 appears to be a splendid year for the refurbished goods sector, the question remains whether this buying trend will continue and grow further even when things go back to normal or the ‘new normal’ or was it just a momentary phase?
QuikrBazaar’s Gudlavalleti is optimistic, looking at the popularity the pre-owned goods have garnered last year. “We are already witnessing three major factors driving the change in consumer buying behaviour–the Indian education system and businesses making the digital shift with a rise in online classes and WFH jobs, modifications in the jobs industry which has resulted in financial restraints and reduced budgets, and lastly, the hike in content consumption on OTT platforms as consumers are spending more time at home now than before. We foresee such factors to influence this trend of putting second-hand first across categories like furniture, appliances and electronics post-pandemic as well,” he said.
According to Cardoza, even though the high refurbished smartphone demands were not fulfilled in 2020, the growing number of dealers in the segment shows a promising future.
“Policies in our country do not allow imported pre-owned devices. At the same time, India still holds a capacity to provide a large volume of used smartphones domestically. The country’s refurb industry needs a good awareness campaign and favourable policies. India has a high growth potential in the refurb sector,” he said.
Further, the concept of reuse plays a key role in sustainable development and promoting circular economy, where products are reusable. For instance, we can design electrical devices in such a way that makes them easy to repair. Similarly, raw materials can also be reused as much as possible. Countries including the Netherlands, France and Denmark are leading the change in circular economy.
For India, as per Cardoza, it is a long road to sustainability. “Our large unorganized sector needs to regroup, and the industry and consumers need to recognize the value of reutilization as well. Smartphone refurbishment is a strong start to reduce e-waste,” he said.
aniltikotekar4sme.com 