Refurbished goods industry in India: Is Flipkart’s promise really worth it?

Flipkart lends a Midas touch to old and refurbished goods industry in India. In its latest venture, Flipkart has launched an e-commerce platform 2GUD where it plans to sell refurbished electronics at 50-80% of the original price. This is the e-commerce giant’s second attempt at the refurbished market after shutting down e-Bay which it acquired a year back. However, this time the focus is only on high-selling electronics.

A refurbished goods market is different from second hand products which are usually used goods. These are pre-owned, unused or returned products which are quality-certified and has a warranty period.

The opportunities in refurbished sector

As per estimates, the Indian refurbished market will exceed $20 billion in the next 6 years. Flipkart, through its usual foresightedness, is all set to grab a massive chunk of this market.

According to a leading industry e-tailer, the refurbished sector is quadrupling on an annual basis. The demand is usually from tier-II and tier-III cities in India. Also, there is a lot of floating population or young professionals who want quality electronics at affordable prices.

Seeing surging demand, many organised electronics sellers are foraying into this business. They are stocking up good quality refurbished electronics and accessories, hence making the supply side strong as well.

Most importantly, there is no stigma associated with using second-hand products anymore. The youth is game for it and most millenials want to own quality electronics at pocket-friendly rates. As per experts, refurbished mobile phone is about 10-20% of the entire mobile phone market.

Competition in the refurbished space

Amazon, Shopclues, Snapdeal and Cashify are few e-commerce websites which earn 5-10% of their sales from refurbished goods. The industry estimates that while new phones have a margin of only 5%, refurbished goods can give a margin of about 10%.  This is the single most motivating factor for organised etailers to flood this market. Flipkart thus has to face a lot of competition in this overcrowded space.

Challenges to enter in the refurbished space

The online market of refurbished goods is not devoid of challenges. An e-commerce player in refurbished markets, needs to conduct a lot of due diligence as well as maintenance before the product is listed on the portal. This involves a considerable amount of monetary investment which may be an impediment for players to enter into this market.

Not just this an existing player will also have to rearrange its distribution as well as logistics network to cater to refurbished goods.

We just mentioned that there is a lot of competition in the refurbished goods market, especially when it comes to mobile phones. Hence the e-commerce players will have to strategize on the product differentiation part well. They need to display only those electronics on the portal which are different from the ones sold on other websites.