His Company: Reverse Logistics
Started In: 2008
Business: Refurbishing and reselling orphaned 'returns' for consumer electronics brands. Is there Money in It?
About Rs 54 crore in annual revenue, with gross margins ranging from 20-40 per cent. Don't others do it too? Sure, but if Reverse Logistics can pull off its consumer facing 'Greendust' brand and outlets, it could become an eBay like platform for returns.
Conceived in South Korea and India, she was finally born in Noida, Uttar Pradesh. Weighing nearly 27 kg, her light grey body glowed white under the fluorescent lights. There were many like her; all bore the same name - WT8507AG.
Within a few days she and the others were put onto a truck bound for Mumbai. Then one day she was put on a rather run-down tempo that wobbled violently over every stone and pothole.
A few hours later she was happy to notice the smiles of a newly wed couple as her protective covering was removed. But then the husband took a closer look and his smile was gone.
"What have you done?" he asked the tempo driver. "This is a damaged piece. The body is dented. I paid Rs 9,000 for a new Samsung washing machine!"
Before she knew it, she was bundled off to a facility for damaged ones like her. The sign outside the building said 'Greendust'. There, a bunch of people put her through a series of tests before trying to smoothen out the dents.
A week later, she was on a truck to Bhiwandi, near Mumbai. Once again, she spotted the name 'Greendust', this time at the sparsely furnished shop where she was put to display. One day, a young couple pointed her out to the shopkeeper, enquiring what's wrong.
"Nothing madam," said the young shopkeeper. "There was a small dent in the body and a scratch on the lid, that's all. You can buy this for just Rs 6,000, instead of the current market price of nearly Rs 9,000. Plus, we're also offering a Samsung warranty on it for one year."
The couple bought her. She had finally found a home.
"We are giving a new lease of life for these products," says Hitendra Chaturvedi, 45, the founder and CEO of Reverse Logistics (RLC), the parent company of Greendust, which buys damaged or older goods at cheaper prices from manufacturers, retailers and even consumers before refurbishing and selling them.
The Samsung WT8507AG is but a drop in the ocean of retail products that are returned by Indian consumers - estimated at 4-5 per cent of all sales. The value of these products in the consumer durables space alone is $265-$330 million. Reverse logistics also covers end of life products that need to be disposed off safely, warranty claims, surplus stock and exchange offers.
Since starting out in 2008, Chaturvedi has managed to secure manufacturing clients like Samsung, LG and Lenovo as well as Future Bazaar, the online retail arm of Future Group. From them, he currently generates revenue of about $1 million every month, translating into an annual turnover of around Rs 54 crore.
He expects to nearly double revenues by next year and touch Rs 500 crore over the next four years.
The Neglected Orphan
Companies and retailers have traditionally paid little attention to 'reverse logistics' - the movement of goods from consumers back to retailers and manufacturers. Given the limited resources and time, any organisation would strive to expand its forward supply chain and sell more of its products than figure out how to deal with the few that are returned. This is where Greendust steps in.
KH Khan, general manager, finance at Samsung India, says the biggest reason for him signing up with Greendust was to clear his warehouse of returns. "Warehouse space is costly all across India and using it for 'B' and 'C' class products (products with minor, repairable defects) is of no use."
In a calculation done for Future Bazaar, Chaturvedi found that each return of a popular entry level mobile phone worth Rs 1,400 was costing the company roughly Rs 1,200 in write-offs and costs. Returned products also become obsolete fast.
"Returns often just keep sitting in warehouses, depreciating, till finally they are sold as scrap for just 5-10 per cent of their original value," says Feroz Khan, formerly the vice-president of operations at Future Group and in charge of the group's online fulfilment and commerce activities, including Future Bazaar. (He left Future Group six months ago to start his own venture).
Nevertheless, there's significant money to be made, in many cases as much as the price of the product being returned. So it made sense to enter a space dominated by the unorganised sector — small-time dealers and individuals who buy damaged/old consumer goods at throwaway prices and channel them to grey markets or salvage components in environmentally unsafe ways before junking the rest.
Given the staggering numbers, entrepreneurs are bound to rush in to provide a solution. Apart from Greendust, there are other well-established companies like Intarvo and Aforeserve in the reverse logistics space. But while most are focussed on the supply side of reverse logistics, Greendust is attempting to become a seller of those goods.
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