While e-commerce is fast gaining ground in the country, re-commerce is not new to India, being driven by the middle class consumers aspiring to own branded lifestyle gadgets for a second hand price. Sailing high on the re-commerce wave is YNew, a re-commerce store launched by Ram Nutakki, Founder, Sloyd Ventures, for life-style gadgets. With consumer electronics industry currently witnessing a rapid growth (17-18 percent CAGR) in India and likely to maintain the pace for the next decade or two, Nutakki feels the country is bound to see a tremendous surge in the used lifestyle gadgets market.
Q. How did you come up with the concept? Also, why did you choose only gadgets for launching YNew?
YNew happened when I was trying to purchase a used smartphone through one of the reputed online classifieds. It is then that I realised the pain points of both sellers and buyers which are not worth the efforts. Also there is no value addition happening from the classified provider on the transaction except helping both the parties to connect. It’s a mere coincidence that at the same time I was looking for consumer business opportunity in emerging sectors and re-commerce opportunity grabbed my attention in no time.
YNew is a neighbourhood re-commerce store for life-style gadgets i.e. smartphones, tablets, laptops, desktops and television sets. It basically addresses the pain points of buyers and sellers of used gadgets through an organised way. By organised manner, we mean that YNew follows all existing best practices and creates new standards and benchmarks to make sure that the customers get the value addition they look for in a re-commerce transaction. Our value proposition to both the customer segments is:
For Sellers: YNew extends hassle-free selling experience to get the best value for their gadget while adding immense value to the transaction.
For Buyers: YNew offers aspirational brands at an affordable price and products that are diligently tested and certified bundled with extended service warranty.
Consumer electronics industry is currently witnessing a rapid growth (17-18 percent CAGR) in India and will maintain this pace for the next decade or two. This means we are bound to see growth in the market for used products in the consumer electronics industry. Drilling down further, lifestyle gadgets like smartphones, laptops/desktops and flat panel televisions show more growth than the remaining consumer electronic goods. Replacement and upgradation frequency and percentage are commendable in these categories which is the major driver for re-commerce. Hence, it seemed all the more natural for good growth numbers in the re-commerce of these gadgets.
Q. Please explain your business model.
The process is simple – the seller’s product is tested and certified internally by YNew engineers. Post the testing and certification, fair market value (Ask Price) of the device is given to the seller. The gadget is then put on the shelf for sale with all product specifications and prospective buyers are informed. Once sold, the sales proceeds are remitted to ‘seller’s bank account with YNew keeping a transaction commission. The transaction commissions are as follows:
|Ask Price (Rs)||% of Commission|
On other hand, buyer gets a tested and certified product with 30 days free service warranty. Exhaustive testing takes place during consignment, maintenance testing while display, and quick testing when the buyer buys the product. YNew also offers extended service warranty on the gadgets if the buyer wishes so at an affordable price of Rs 999 per annum.
Q. Tell us about your retail footprint in the country.
YNew opened its pilot store at Hyderabad in April 2013. Sloyd’s vision is to build a franchise conglomerate in India, so it intends to build and operate business models and brands which can be taken through only franchising route. As a franchisor our value proposition is not to compete with our franchise partners in any of the territories we want to penetrate.
Q. What kind of franchisees do you look for?
YNew franchisees should own the territory on exclusivity basis for a minimum of three years agreement tenure, have an area of 500 sq.ft., an initial investment of about Rs15 lakh, inclusive of the sign-up fee, lease advance, store set up and other pre-commencement expenses; sound liquidity track record, eye to detail and passion for execution.
Q. Which are your highest selling gadgets?
Smartphones obviously, are moving fast in the re-commerce trade followed by laptops, desktops, and televisions. Smartphones grab around 35-40 percent of the overall pie. Laptops too closely follow smartphones with 35-40 percent share. While desktops form another 10-15 percent, flat panel televisions come up to another 10 percent.
Q. What is your typical customer profile?
From a sellers perspective, YNew witnesses more sales from upper-middle class and upper class strata of the consumption pyramid. Buyers are aspirational and value conscious who want to own a gadget at least two levels up from their current affordable price point. They hail from middle-class and below middle-class strata of the consumption pyramid.
Q. Which are the emerging second hand goods/ gadgets markets in India?
We look up to top 15 cities (Cities with more than 1 million population and $10bn GDP) to be ideal markets for growth of re-commerce in lifestyle gadgets. They include Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad, Pune, Nagpur, Indore, Patna, Ahmadabad, Surat, Jaipur, Chandigarh, and Lucknow.
Q. By what percent does the cost go down for second hand products?
Depending on the age of the product and the price depreciation compared to its original price, it varies from 20 percent to 70 percent.
Q. How many gadgets do you sell in a day/ month?
We have been selling 50-60 gadgets in a month since last two quarters at our pilot store. However, the numbers are likely to grow multi-fold once we have larger footprint in a given market. The average ticket size for a buyer at our store is Rs 15,000 and we are operating at a GMV of Rs 10,00,000 per month.
Q. What are the challenges faced in re-commerce, especially for gadgets?
Price volatility is a big challenge. Electronic goods are prone to greater depreciation and this can eat into the margins of the products (in case of inventory purchased by us). There is also a social stigma among people against buying used products. Unlike conventional retail stores, re-commerce faces the problem of non-persistent supply because supply is largely driven by individual sellers and they cannot sell used products throughout the year.
At the operational level, re-commerce is riddled with complex operations (on both seller and buyer levels). Unlike retail, it is not blessed with any off-the-shelf automation solutions (POS solutions) that match the operational requirements. Therefore, one has to either build their own customised automation solution (which is a very costly proposition) or do things manually (that results in non-scalability).
Q. How do you keep a check on the stolen goods that might come to you for sale?
As a policy, YNew discourages the acceptance or sale of stolen goods so certain precautionary measures have been set up to accepting such goods.
At people level, the seller identity must be proved for which an ID proof and bank details should be submitted while consigning or out-right sale and the declaration document must be signed. All the seller payments are routed through only banks transfers and strictly no cash transactions are allowed. This practice alone insulates our system from such hackers.
At the product level, smartphones are more prone to theft and thus we pay more emphasis on the category. We ensure to cross check the IMEI number of smartphones with the stolen mobile registry maintained by the police department of the respective city for stolen mobiles. If any product is found to match with the registry, the police is immediately informed.
Q. What is your targeted turnover for this/ next fiscal?
Sloyd is planning to roll-out 50 YNew stores by 2017 across India and clock a turn-over of Rs100 crore to gain the market leadership position in re-commerce.
In this fiscal, as part of the phase-I expansion, we intend to set YNew stores in Hyderabad (apart from the pilot store), Bengaluru, and Mumbai.