Walmart Inc.-owned Flipkart plans to restructure its refurbished products business ahead of a planned US listing in 2023, said two people aware of the matter.
The company is exploring partnerships with refurbished service providers and is looking to sharpen its focus on offline retail channels instead of relying solely on the online model to run this business.
“Flipkart is heading for an IPO (initial public offer) and is under immense pressure to tie loose ends. The refurbished business, under Jeeves F1, has seen a significant dip in revenue. As a result, the company is planning to move from a B2C (business-to-consumer) to a B2B (business-to-business) model and sell refurbished devices through offline channels only,” one of the two people said requesting anonymity.
The person said Flipkart gets smartphones either as product exchanges or buybacks, which are further sold via third-party sellers under the refurbished business. However, selling these through Flipkart.com “is increasingly becoming a challenge” as most refurbished sales happen offline. “Most refurbished buyers now want to touch and feel products before buying them,” the person said.
As much as 40% of sales of refurbished electronic products happen offline, said Faisal Kawoosa, chief analyst and founder at market research firm techARC. With second-hand phones included, the share of offline sales is 70-80%, he said.
“It is difficult to sell certain things online, especially second-hand electronics. Though service providers have several checks for quality assessment, it is difficult for buyers to assess a product without seeing or experiencing it. Buyers want to examine how much scratch a smartphone has or how sluggish it is,” said Kawoosa.
The domestic market for refurbished electronics has been growing at a faster pace than that of new products as companies battle a supply crunch amid the global semiconductor chip shortage while prices of electronic items rise due to higher input costs.
Market researcher Redseer said in a report in May that the Indian market for refurbished electronics could hit $11 billion by March 2026. Flipkart will have to compete with rivals like Cashify, HyperXChange and even Amazon, which runs a refurbished business.
Both Cashify and HyperXChange have large networks of offline stores. According to a February report by VCCircle, Cashify owns 90 offline stores and eight franchise stores in India, with plans to open 100-150 more over the next year. HyperXChange runs more than 350 stores, which it plans to expand to 3,500 this financial year, the company said in an interview with The Hindu Business Line in May.
As part of its strategy to grow the refurbished products business, Flipkart acquired this January re-commerce company Yaantra for an undisclosed amount.
The second person cited above said the deal will help Flipkart exploit the startup’s capabilities in repairing electronic items. Flipkart’s servicing arm, Jeeves-F1, provides services like installation, repairs, returns, and refurbishment services for after-sales needs of brands.
In an email response to queries, Flipkart confirmed that it is looking to expand in the retail segment.
“To drive greater synergies, Flipkart Jeeves-F1 will be leveraging Yaantra’s product capabilities and its existing operations and network to scale its refurbishment operations and enhance opportunities in the retail segment. This new channel will help offer customers access to a wide range of products that they can exchange or trade-in,” the company said.
Flipkart didn’t say whether the restructuring will affect employees in its refurbishing business, or existing sellers of refurbished products on its platform.
The first person said, however, that the company should be absorbing those employees in other businesses.
This March, Flipkart appointed former Unilever PLC executive Hemant Badri as its senior vice-president, supply chain. At the time, Badri was slated to head the Ekart-Myntra Supply Chain and Jeeves-F1 businesses at the company, Flipkart group chief executive Kalyan Krishnamurthy, said in an email to employees at the time. Ekart is Flipkart’s in-house supply chain arm.
Source: Mint