Wednesday, November 13, 2013

Ram Nutakki makes profits from second-hand products!

If you've ever considered buying a second-hand smart phone or plasma TV, you've probably experienced the following pain points -- there's no way to tell whether the gadget is in good shape; there's no telling whether you've been gypped on its price; and you need to visit the seller to take delivery of your product.
These were the questions that confronted 36-year-old Ram Nutakki when he wanted to buy a used smart phone in mid-2012. "I realised that to buy a phone at half the original price, I had to meet three or four people and invest a lot of time and effort to find what I wanted. Also, there was no way to tell whether the product would work properly after the purchase," reveals Nutakki.
 
Defining 'Re-commerce'
After a little research, Nutakki realised there was a sizeable opportunity in the 're-commerce' space for lifestyle gadgets. With a consulting background in SaaS and e-commerce, Nutakki gave it some serious thought. "Re-commerce in India is confined to used cars, which is a big-ticket transaction. I found a huge demand for second-hand lifestyle gadgets, which is a considerably smaller-size transaction."
But he had to address something else, that had very little to do with actual commerce. "Indians are reluctant to make second-hand purchases because there is no guarantee on how long these products will last. Besides, there is the stigma of owning a hand-me-down," he explains.
All things considered, Nutakki felt it was best to open a brick-and-mortar store that would serve both buyers and sellers of used lifestyle gadgets. These products would be refurbished, if necessary. He finally took the plunge in April 2013 and opened a store in Hyderabad.
Taking The Plunge
The venture struck a chord with a former colleague, Mitesh Majithia, who came on board as co-founder, and between the two of them, Nutakki and Majithia earmarked USD 1 million for the project as seed funding from their personal savings. "We put a lot of thought into everything, from the location of our first store to store design and the brand name," reveals Nutakki.
 
"Through the brand name, we wanted to convey to the value-conscious buyer that there was no need to spend a bomb on a new gadget when you can procure one that is as good as new with a service warranty, for 30 to 40 per cent of the original cost," he reasons.
YNew is located at a prominent marketplace in the heart of the city, which is a hub for students and office-goers. "The store is strategically located and designed to grab eyeballs of people who are aspirational yet price conscious. The store offers three categories of products or 'screens' -- smart phones and tablets, laptops and PCs and LCDs and LEDs.
 
Revenue Model
The YNew store entertains both buyers and sellers. If you're a seller, store engineers will tell you on the spot whether your product is worthy of being resold as is or whether it needs to be refurbished. In the latter case, it takes just a day or two to make a product shelf-worthy. The product has to then meet 13 parameters before it is finally approved for sale.  The store also offers repair services.
YNew charges a 5-per cent commission on products whose sale value is more than Rs 20,000, 8 per cent on products whose sale value is between Rs 10,000 and Rs 19,999 and 12 per cent on products priced between Rs 5,000 and Rs 9,999.
 
Once the transaction is complete, the seller receives the proceeds of the sale within 48 hours. As for the buyer, YNew offers an almost as-good-as-new product with a 30-day service warranty. It also offers extended warranty plans.
Since its launch in April, YNew has assisted 120-odd sellers including a select group of agents and refurbishers and has sold 350-odd gadgets. From a sale of Rs 1 lakh in its first month, YNew clocked Rs 14-15 lakh in September. No prizes for naming the fastest-moving gadgets -- smart phones and laptops.
Expansion Plans
Encouraged by the response, YNew is looking at increasing its footprint via the franchisee model. Franchisees will gave to invest Rs 15 lakh, which includes a sign-up fee, lease hire of real estate, store set-up costs and other supporting infrastructure. Nutakki has chalked out plans to launch nine franchise stores by the end of 2013 in Hyderabad and Bangalore.
 
While YNew has made its mark in Hyderabad and has ambitious plans to expand, it remains to be seen whether the rest of the country warms up to the idea of owning refurbished lifestyle gadgets.
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