E-tailer GreenDust salvages & sells; Can it leverage reverse logistics biz in a big way

Remember those factory outlets which offered you branded seconds at oh-so-cheap prices, much below the showroom price tags. Or those backstreet electronics stores where you could find the latest handsets, again much below the MRP, as they were second hand products but refurbished to look as good as new. Well, you can have all that and more at GreenDust, an e-commerce site catering to both retail customers and bulk buyers, and offering unused, branded factory seconds, surplus, overstock and refurbished products at a price which is 25-30 per cent less than the MRP (or so the company claims).

GreenDust is run by Reverse Logistics Company Pvt Ltd (RLC), a reverse supply chain company set up by Hitendra Chaturvedi (CEO) in 2008. He raised a seed capital of Rs 60 lakh from the Mumbai Angels and also put in some of his own money to get RLC off the ground.

Before starting RLC, Chaturvedi was a senior director at Microsoft and prior to that, worked as the VP & chief strategy officer at Newgistics, an IT-enabled reverse logistics company in Texas (it's the place where he first learnt the nitty-gritty of reverse logistics and the scope it offers). He holds an engineering degree from IIT Roorkee and an MBA degree from Southern Methodist University (Cox School of Business), Dallas.

His stint at Microsoft actually helped him conceptualise the new venture. Chaturvedi was heading its OEM division in India and it gave him a clear idea about the vastly untapped reverse logistics sector at home. According to him, the return rate for slightly defective products is 4 per cent, which makes this industry an estimated $15-16 billion opportunity.

"Returns management is an established discipline in the western countries (even Apple does it). While others are competing in the already over-crowded new products market, we focus on the returns space where we can be a catalyst to the companies selling new products. So it is a strategic choice," he said.

"Indian consumers are extremely value conscious and are constantly on the lookout for deals without compromising on quality. GreenDust fills this need," explained Chaturvedi about customer connect in such a niche category.

But isn't buying such products a tad risky? What happens if a product doesn't work after it is purchased? And finally, would they be safe to use?

Well, the company has a stringent quality control process in place for that purpose only. After products are sourced, they are put through a quality inspection. If certified as fully functional, GreenDust attaches a warranty to each product and sells it. The company also offers a 15 day replacement guarantee.

RLC has tied up with reputed OEMs and e-com portals like Futurebazaar, HomeShop18, Dell, HP, LG, Samsung, Toshiba, Phillips, Panasonic, Wipro and Acer – managing their reverse logistics functions and sourcing products. It currently claims to have more than 5,000 SKUs across 11 categories (further divided into sub-categories), including mobile, laptop, camera, electronics, and kitchenware and personal care items, among others.

Besides the e-com portal, the company runs brick-and-mortar facilities in Delhi and Bangalore for sourcing, refurbishing and distributing returned products. It also has 15 distribution centres across Jaipur, Cochin, Chennai, Mumbai, Lucknow, Hyderabad and Ahmedabad (which store and re-distribute the finished goods), around 40 franchisees and 1,000 dealers, mostly in the metros and tier II cities. Also, from the single establishment in Mumbai, the company has grown considerably and currently has 300 employees on board.

In case you are wondering whether GreenDust sells any new product, the answer is, yes! It offers some obsolete models (like the BlackBerry 8330, which you wouldn't be caught dead with), which are not factory seconds or refurbished.

Show me the money

RLC generates revenues by charging its OEM partners a product processing fee and also from product sales. The company claims to have 20,000 visitors a day, with a conversion rate of 3 per cent, which means it is currently doing 600 transactions on a daily basis or 18,000 transactions per month. It also claims to have posted Rs 100 crore in revenues in FY2011-12 and is targeting to reach Rs 500 crore by 2015.

"Being the sole player for such products online, we mainly compete with the unorganised grey market where goods are sold at a discount. Our competitors also include original equipment manufacturers (OEMs) who manage their own reverse logistics," said Chaturvedi.

But is there a market for salvaged products in India?

Investors, apparently, think so. In March 2010, RLC raised an undisclosed amount of VC funding from Kleiner Perkins Caufield & Byers (KPCB) and Sherpalo Ventures, as well as from Reliance Venture Asset Management.

Going forward, RLC is planning to expand its reach within the country and also enter new markets like South-east Asia, Africa and the Middle East is on the cards.

While the general e-commerce model has already been done to death, it is good to see a new player thinking out of the box. And the fact that this business model has been very successful in the offline space (just look at the flourishing grey market in India) means that consumers are interested in buying such products. But whether they will do it online is another story. Let us wait and see.