The global refurbished smartphone market gained momentum in 2018 and clocked a 10% year-on-year growth in the second quarter.
China is the largest market for refurbished goods, while India saw the highest growth at 41% of late.
Kolkata-based HyperXchange is one of the top sellers of refurbished mobiles and laptops in India.
The company, founded in February 2016, is aggressively working its way up to become India’s biggest consumer brand in refurbished space.
“We are in talks with several players in China for procurement, and local repairs in India on a long-term basis,” Dipanjan Purkayastha, co-founder of HyperXchange, told the Passage.
He said he has plans to launch in the US (refurbished gaming consoles) in February and Southeast Asia next year.
The refurbished market thrives on the back of higher profit margins. While offline retailers get a 2-3% margin from selling new phones, refurbished products fetch a margin in the range of 15-20%, said Dipanjan.
The product changes hands from a seller to a retailer to a wholesaler to a marketplace before reaching the consumer. The margins add up to the final bill, Dipanjan said. But with HyperXchange, the supply chain is shorter as we get the products directly from the original seller, he added.
HyperXchange buys used gadgets from the owners. The company sources from buy-back dealers, unboxed products etc. The products are overhauled and sold through both online and offline channels. HyperXchange has a strong online presence in Flipkart, Amazon, Quikr and Olx. The company has 50 physical stores now and plans to expand to 1000 stores by end of 2019.
Refurbished gadgets used to be a scattershot market.
“The unorganised nature of the industry has led to low trust and awareness about the products in the minds of customers”, said Ujjwal Chaudhary from consulting firm Red Seer.
However, the emergence of players like Togofogo, Budli, HyperXchange, Cashfiy and the likes have helped build customer confidence in refurbished products.
As Zefo’s founder Rohit Subramaniam said, companies need to “come up with ways to build trust like offering guarantees, warranties, buybacks, etc.” and be “transparent about the product”. HyperXchange throws in freebies like phone cases and laptop bags, 12-month warranty, aftersales service to sweeten their deals.
Earlier, when second-hand dealers buy old phones in bulk, the top 20% of the lot can be sold at a 25% margin, but the bottom 20% go for a loss, which means, on the whole, they ended up making 8-10% margin only, Dipanjan said.
HyperXchange uses patented hardware that automatically diagnoses around 10 phones per minute, based on which they can come at a price, which, according to Ankur Nigam, former partner at KPMG, is an almost-exclusive practice in India. Most refurbished goods sellers are aggregators of inventories, who have the capability of selling but not exactly refurbishing, he told The Passage.
Apart from the traditional channels, HyperXchange is all set to launch self-service kiosks (like an ATM) as the last mile shops where people can sell and buy phones at a vending machine. The customer can deposit the old phone in the box, and the bot will run a differential and arrive at a price. Customer can either get cash directly or a coupon to buy refurbished phones from the selling machine next to it. Companies like Aihuishou have launched the kiosks model in June 2018 in China.
Most refurbish companies deal in high end phones. “How low can you go for cheaper phones?” asked Dipanjan. Besides, the quality of low-end phones correlates with the prices and repairs are not worth it. And since refurbished products find a good market in tier 2 and tier 3 cities, a premier phone at an attractive price holds more appeal. HyperXchange has a big offline plan in tier 2 and tier 3 cities as well, he said.
HyperXchange registered a USD 5 million annual turnover in 2018 – 50-fold growth compared to the first year- of which 80% comes from the sale of mobile phones and the rest from laptops.
The rapid growth of refurbished industry has drawn attention from investors. Cashify, another refurbished smartphone seller, raised USD 12 million in Series C round from Chinese investors such as CDH Investments, Morningside Group and Aihuishou. Recommerce platform Zefo raised USD 9.2 million in Series B funding in October 2017. HyperXchange has also received private funding from CP Gurnani, CEO of Tech Mahindra Group.
Though it’s an “up and coming business”, as Ankur puts it, 95% of the market is still in grey area. That’s also one main reason why Dipanjan believes the players should come together rather than fight among themselves.
HyperXchange is working with Flipkart, and is in talks with Quikr, to create a consortium with unified standards.
Right now, HyperXchange is not eyeing China market as the firm is already busy with the US and Southeast Asia launches.