With smartphones launching almost every week, it becomes difficult to control your temptation to upgrade to a newer model every next year, or even in a few months.
But frequently buying a new device may not be affordable for most people. And, this is where selling your old smartphone can help. However, selling a second-hand smartphone has never been easy in India. With the sector being highly unorganised, finding a buyer ready to pay a fair price for your phone is a daunting task.
Two friends, Mandeep Manocha and Nakul Kumar, saw this as an opportunity and started a recommerce firm, Cashify, in 2013. The company enables its customers to sell their old mobiles online and get instant cash along with a free home pick-up. “We realised that electronic device change rate has become faster and yet millions of people do not have access to technology and we can bridge the divide by building a recommerce company buying used electronics from individual consumers, refurbishing them and then selling them to value-conscious consumers,” Manocha said.
Cashify Co-founder Mandeep Manocha
While the space is already dominated by the online classified platforms like OLX and Quikr, what makes Cashify stand out is its C2B (customer-to-business) business model and an objective-based approach to determine the value of the device.
The Gurugram-based start-up has recently raised $12 million in a Series C round of funding. The investment was led by China's CDH Investments and MorningSide Group.
About the latest funding to Cashify, a top executive of CDH Investment said he saw a lot of potential in Cashify and the re-commerce market in India. “The re-commerce market in India for smartphones might be larger than China's in the future. It means a lot of huge opportunities and I can see Cashify as the market leader, as it keeps on innovating,” Vice-president of CDH Investment Xiaoyu Matthew Ma said.
Although decreasing prices of mobile data and smartphones have led to a higher adoption of such devices in India, a majority of Indians are yet to own a smartphone. According to a survey conducted by the Pew Research Centre in 2017, only one in four adults in India either owns a smartphone or uses the internet occasionally.
On the other side, the people who already own a smartphone tend to change it every 12-15 months. With close to 130 million mobiles being sold every year, the trend leaves a large number of old devices to be traded in the second-hand market.
With a strong supply and a good number of prospective buyers, the situation presents the perfect opportunity for re-commerce firms. Manocha believes that by 2022, 180-200 million used smartphones will be traded in the second-hand market.
The firm has a simple revenue model: Buy old phones, add value and then sell them in the second-hand electronic distribution channel at a margin.
According to the co-founder of Cashify, the start-up does 100,000 transactions a month. He refused to divulge the company’s actual earnings but said: “We can tell you that we had a revenue of over Rs 1 billion in FY17-18 and will grow three times in FY18-19.”
The road ahead
Cashify is looking to double its volume to 200,000 per month from the current 100,000. It is also planning to open 50 offline kiosks in the next 12 months.
On the strategic front, the firm is looking to increase interaction with its customers. “Since ours is a low interaction business as a customer sells a smartphone once every year and other electronics once in many years, we are constantly on the lookout to increase our customer touch points and add revenue streams,” Manocha said.
Cashify has taken steps in this regard. It has recently launched a service to repair/replace smartphone screens at home.
Although the potential is huge, the second-hand goods market in India is still in a nascent stage and primarily unorganised. Consumers are used to dealing with a lack of quality assurance and uncertainty of gadget’s authenticity. Thus, the success of start-ups in this field depends on the trust and credibility they are able to establish with customers.
$12 million investment led by CDH Investments and MorningSide Group
Close to $1 million investment by Trifecta Capital
Partnerships and acquisitions:
Cashify forged a strategic partnership with Chinese re-commerce giant AiHuiShou in June 2018
In June 2016, Cashify acquired Bengaluru-based MobiBing in a cash and stock deal (value undisclosed)
Sourcing, cash flow big hurdles
Sandeep Murthy Co-founder and partner, Lightbox VC
The allure of the second-hand market is understandable. In India, there are over a billion people, most at the lower end of the income ladder but aspiration-al and plugged into the modern world. Selling used devices to them at a low price makes sense but there are challenges.
Sourcing second-hand devices at scale is hard. Consumers tend to use products to their bitter end. Devices that the masses will part with are expensive to refurbish and sell. Retailers and original equipment manufacturers are a good source to get overstock product and damaged boxes, but they want a higher price and cash up front. Developing a scalable and economically viable channel for used products will require significant capital.
Another capital issue comes in the form of working capital. It usually takes four-five weeks to refurbish a used product. Often delayed access to the original spare parts can push that timeline even longer. This means cash flow can be difficult to manage as a business scales.
Reselling used product requires building trust with consumers. They have to believe that the used item is as good as the new. This can be an expensive endeavour, especially with device manufacturers and retailers spending heavily to sell their products — just see the numerous e-Commerce ads featuring phones.