You are here: Home » Companies » Industry
Business Standard

Used is not a dirty word in start-up world

Industry estimates peg the value of refurbished phone market at around $ 1 billion

Patanjali Pahwa  |  Mumbai 

During last year's festive sale, Amazon, Shopclues and eBay unveiled a new category - refurbished phones. The category was not a big hit. But there were signs of promise: Demand was higher than expected. Big discounts on as-good-as-new phones impressed the value customers and they were pulled in.

Industry estimates peg the value of refurbished phone market at around $ 1 billion. "The mobile phones market is roughly valued at $15 billion. About one-two per cent of the phones, in our estimation, are returned within the first month. And another six-seven per cent is returned within the warranty period. This brings the market roughly to $1 billion," said Nitin Kochhar, assistant vice-president (categories), Shopclues. Most of these returned phones can be touched up and sold once again at deep discounts and that is where the market comes from. According to Kochhar, the market might reach up to $5 billion in three years.


Refurbished phones are just the tip of the iceberg, say experts. Such phones fall under shared economy, a concept that is being taken seriously by investors and entrepreneurs.

"India has always been clued in to the used market. We would give away our old TV to the maid or sell our laptops by weight," said Harish HV, partner, Grant Thornton. OLX and Quikr brought it into focus but listing wasn't enough. It needed to be interactive and that's what others brought to the party. And, it's not about electronics alone, but extends to homes, cars and clothes.

One of the biggest shared economy segments in the world is shared homes, primarily Airbnb. The company encourages people to let out their spare rooms or homes to travellers. It not only generates income but also helps the traveller get a first-hand experience of how life is in that city or country, creating a used case. A buzzword that exists in every venture capitalist's handbook.

"Indians are waking up to let their rooms out to fellow travellers," said Yogendra Vasupal, founder, Stayzilla. The Bengaluru-based company, a marketplace for hotel rooms, recently launched Social Stay, a format similar to Airbnb but with a marked difference. The company uses its special "matchmaking tool", which helps people find others from their own special interest. "One of the primary reasons we were not comfortable was we didn't know who would be living with us in our own homes. But if we can identify them from a community of interests and hobbies, we could open up to it," he added. The company, he said, has seen an upturn in adoption. The average ticket size for "alternative arrangements" is bigger as well. "People are keener on paying Rs 1,600 for a home stay arrangement than Rs 1,100 for a hotel room," he said. After starting last month, the company already has 13,000 rooms listed on its platform.

Stayzilla has been popular with investors as well and has raised over $20 million from Nexus and Matrix Partners over the last year.

The growing wave of shared economy adoption reached the shores of India with transport sharing.

BlaBlaCar has been European backpacker's ride sharing service of choice. The company came to India in January and since then it has been on an upward trajectory. It currently boasts of 17 million km driven through its service.

"We have tied up with IRCTC to encourage users to book BlaBlaCar if their tickets are waitlisted. We also run campaigns on radio to encourage drivers to sign up for BlaBlaCar. As a result, almost 350,000 seats have been shared in over 700 cities," said Raghav Gupta, country manager, BlaBlaCar.

The French ride-sharing company, internationally, raised $200 million recently and is valued at $1.5 billion.

Its local rival, Ola, too, has been riding on the ride-sharing wave. The company declared that it had raised $225 million in September, not too long before announcing its car-pooling, Share, and bus aggregation services, Shuttle. Ola plans to run pilot projects in Gurgaon and Bengaluru to perfect Shuttle before introducing it to other cities. Share was launched in October with the pilot in Bengaluru. Share uses an algorithm to match riders and their destinations with shared cabs.

Venture capitalists argue that used cars, too, should be considered part of the shared universe.

"Currently, Droom has an annual GMV of Rs 200 crore and we expect to reach Rs 600 crore by the end of the year. The used vehicle universe is definitely on the rise. Just the used vehicles market, online and offline, is worth $60 billion," said Sandeep Aggarwal, founder and CEO, Droom. Aggarwal explained that as the buying power increases, so will the churn of vehicles. "Even the average ownership time is dropping. Our research shows that for every one new car bought, 1.2 used cars are sold," he added. He expects that four per cent of all households to own a car (used or new) and 24 per cent to have two wheelers.

"We raise the shared economy to even planes. We are a marketplace where one can rent airplanes, which stay idle 80 per cent of the time," he said. The company has so far raised $16 million from Lightbox Ventures and Japanese internet firm Beenos.

Renting tuxedos for graduations and weddings doesn't raise too many eyebrows but used clothing doesn't inspire too much confidence in the Indian mindset. VCs believe that is now set to change.

There are now several bootstrapped companies that have popped up in Mumbai alone that allow users to rent clothes. The Style Door, SwishList, Devil's Closet and Luxemi are some examples. Currently, the average ticket size of about Rs 3,000, is an encouragement to investors but it might still be at the crux of the next big wave.

This is just the beginning, analysts said, and the market will see an explosion of shared goods and services in five years.

SHARE AND CARE
  • Industry estimates peg the value of refurbished phone market at around $1 billion
     
  • One of the biggest shared economy segments in the world is shared homes, primarily Airbnb
     
  • Blablacar has been European backpacker's ride sharing service of choice. The company came to India in January and since then has been on an upward trajectory. It currently boasts of 17 million km driven through its service
     
  • There are now several bootstrapped companies that have popped up in Mumbai alone that allow users to rent clothes. Currently, the average ticket size of about Rs 3,000, is an encouragement to investors but it may still be at the crux of the next big wave

First Published: Mon, November 02 2015. 00:16 IST
RECOMMENDED FOR YOU