Opinion: India’s recommerce market can reach $4b in size, but is still untapped

Photo credit: Luke Wroblewski / Flickr

Author’s note: This article was co-written with Kavita Joshi, director of operations at Budli.in.

I recently visited China with a startup delegation, and saw firsthand the evolution of the internet sector there. China’s reverse commerce or recommerce (used goods market), especially of electronic gadgets, was worth US$60 billion in 2016, bigger than the ride-sharing sector; some organized players is worth over half a billion dollars.

Here’s what it looks like in India.

Opportunities abound

Recommerce appeals to the aspirational and value-conscious nature of the Indian consumer. The feeling of status elevation by using a better-quality brand or product at a reasonable price point is helping this segment grow. Even more so, the large number of first-time buyers, students, and technophiles who want to upgrade their gadgets find great value in refurbished smartphones.

There is also a huge untapped supply of used smartphones in India. For example, many smartphone users sell their devices after using it for less than two years, meaning that each device usually changes hands three times before reaching the end of the product life cycle.

According to a Deloitte India report, the Indian used smartphone market is expected to reach US$4 billion by 2020.

An unorganized sector

However, the secondhand goods market in India is still primarily unorganized. Consumers are used to dealing with a lack of transparency, limited selection, no quality assurance, and uncertainty of a gadget’s authenticity.

Transactions primarily happen through unorganized offline dealers across the country, especially in tier-two and tier-three cities. Every metropolitan area has a gray market that deals in secondhand electronics, but most of these are notorious for stolen goods.

Currently, there is no established brand in India that has created a mind space among consumers in this segment. Apart from the offline dealers, there are consumer-to-consumer (C2C) online classifieds. Ecommerce marketplaces like Amazon and Flipkart offer exchange options, while others offer refurbished devices for sale, but these options are still relatively nascent.

The fragmented supply chain and reverse logistics also hinder the growth of recommerce.

Looking ahead

Thus, there is a strong, unmet demand not only for devices that are in good condition and have lower price points but also for a trusted source to sell them. Investments in this sector, however, are limited so far, considering the market size and opportunity.

The primary reason for this is the signaling mechanism which investors in India look at. Most VCs look at comparable models in the West and replicate it in the Indian market, when they should be looking eastward at China, which has more parallels with the Indian market than developed markets like the US have.

Considering the growth of recommerce in India going forward, it seems inevitable that companies focused on recommerce will emerge. Brands that are focused on new products, on the other hand, will find it difficult to create the same impact.