Ever wondered what happens to the TVs, phones and refrigerators that are returned to original equipment manufacturers (OEMs) for minor defects and damages.
Well, not all of it gets destroyed. The companies dispose some of it in seconds sales, but majority gets lapped up by refurbished goods companies who, after removing the defects, sell them. And the discount for the customer can be huge, as much as 30-40% over the mark-up.
Also, a huge number of goods returned to online retailers land with the refurbished goods makers.
With the business booming, GreenDust, India's largest retailer of refurbished goods, is adding a host of new products to its existing bouquet of consumer electronics and durables sourced from OEMs such as Samsung, LG, Panasonic, Whirlpool, Lenovo, Philips and Godrej.
It has tied up with e-marketplace operators such as Flipkart, Amazon and Snapdeal for handling their returned goods.
Hitendra Chaturvedi, founder and CEO, GreenDust Pvt Ltd, told dna, "E-marketplace operators sell a variety of product categories. Our backward supply-chain agreement with these platforms will lead to offering a host of new products to our current bouquet. Categories like lifestyle, fashion, apparels, footwear, etc will get added.
As the tie-up is recent, volumes are low but I see them increasing. Six months down the line, the product mix will change and a completely different set of products will join the top selling list."
The company is also in very initial stages of discussion to extend its warranty to individual sellers of used items on various platforms like eBay, Quikr and OLX.
"For instance, we can inspect/certify and value-add a smartphone that's used for a year and is in a very good condition, with a GreenDust six-month warranty, for a cost. Such products can then command a better price when sold online," he said.
Chaturvedi started in 2008 by handling reverse logistics of OEMs, that is, goods returned due to in-transit damage, end-of-life product, factory seconds, surplus, etc. The business model revolves around acquiring these goods, servicing/repairing (those with minor issues), categorising them as refurbished and surplus and, selling through a different channel at considerable discounts. For the fiscal 2015, the company is targeting revenues of Rs 1,200 crore.
"Our other entity, Reverse Logistics Company (RLC) primarily works as the sourcing engine. Returns from OEMs are sourced (at discounted rates), certified (one-year extended warranty by GreenDust), repair costs are added and then brought into the market at 30% to 40% discount to the fresh stock. These goods are sold under the GreenDust banner through the physical stores and our online channel," he said.
Around $12-15 billion worth goods are returned every year in India. Of which, returns from OEMs / retailer across all industries is 4-5%. Despite being a new sector, in the e-commerce space it is 15% because the returns policy is more customer friendly.
"In fact, cash-on-delivery (CoD) returns rate is much high at 40% mainly because of spur-of-the-moment buying followed by buyer remorse when the product lands up at the door," said Chaturvedi.
RLC has 1.25 million square foot space of warehousing and repair units across 14 value add centres (VAC). Each VAC is spread across an acre and the plan is to add three centres in the near future. While one will come up in Eastern Uttar Pradesh - Bihar, the other two will be in the East and Central India (Indore/Bhopal). The new centres would require capex in excess of Rs 5 crore each.
GreenDust currently sells goods across four categories – home appliances (refrigerators, air-conditioners, washing machines etc), consumer electronics (LCDs, LEDs, music systems etc), IT products (laptops, desktops, servers etc) and mobiles. The company has 275 retail outlets (all franchise) and the number is set to touch 300 by the end of this fiscal. Majority of the outlets are in Tier II and III cities and each outlet is spread across 1,000 to 1,500 square feet.
According to Chaturvedi, each store owner would require working capital of about Rs 3 lakh in the initial stages. "The franchisee spends approximately Rs 50,000 odd every month as operational and if he manages to sell an inventory of Rs 10 lakh every month, on a margin of 10% to 15%, he is comfortably making good money. In fact, our franchisees make two to three times more as compared to a retailer of new goods where margins are not more than 4% to 5%," Chaturvedi said.
Additionally, the franchisees also benefit from the retailer's e-commerce platform – GreenDust.com, which has now become a primary channel for sales. "It's sort of a marketplace wherein our franchisees become vendors. The difference being, franchisees buy the products once they are certified by GreenDust and uses the online channel to sell," said Chaturvedi.
On the international front, the company has begun managing returns of Walmart and Home Depot in the US. The products are sourced from the US and brought to the Middle East for repairs, servicing and other value addition. These products are then sold in West Asia and Africa.
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