In another room, phones that have been through this scrutiny are stored on shelves, stacked like biscuits in a supermarket. As and when orders are placed, the phones are dispatched.
The Gurugram property is just one of six warehouses which belong to Cashify—a leading player in India’s ~$4 billion used smartphone industry. In a space dominated by mobile phone dealers and distributors, Cashify has built its brand around making the buying and selling of used phones easier.
Unlike the unorganised sector, it does not face the problem of price discovery, where the seller wants to sell high and the buyer always wants it cheap. Instead, Cashify’s algorithm determines the value of a used phone based on various criteria, such as age, condition, and warranty coverage.
The company also offers services such as home pickup, and has kiosks at malls and metro stations that serve as drop-off points.
But Cashify wants to be more than a trader in used phones. It aims to be a part of your mobile phone’s life cycle. Users can buy accessories, get their devices repaired, and eventually sell or recycle them via Cashify.
Already, the company sells about 120,000 used phones monthly. This is just a fraction of the close to 2 million second-hand phones that get sold in India every month. Clearly, there’s immense headroom for growth. India is the second-largest smartphone market in the world after China. As per research firm IDC, 152.5 million new phones were sold in India in 2019. As phone features evolve rapidly, consumers are changing phones every 12-14 months, fuelling the second-hand market.
Cashify’s market opportunity puts it in a sweet spot, something that’s attracted venture capitalists (VCs). Together, they have invested $24 million in the platform. This is quite unusual, given that earlier companies in the used smartphone sector such as Just Like New and Surpluss, haven’t been nearly as lucky. The Cashify bet is not just about market potential; it’s also how Cashify has managed to sustain its business over the last five years, even as many of its competitors—such as Overcart, Surpluss and Karma Recycling—went out of business.
A lot of its rivals struggled in the face of deep discounting by e-commerce platforms to subsidise new phone sales. But with the unorganised market still accounting for 95% of used smartphone sales, Cashify can become a billion-dollar company in the next two to three years and float an initial public offering (IPO) in about five years, says investor Arpit Agarwal, principal at Blume Ventures, an early stage venture capital firm which has invested in the company.
Cashify wants to become India’s AiHuiShou, China’s largest used smartphone player—valued at $2.5 billion as per its last fundraise in 2019. AiHuiShou, which has invested in Cashify, sells a million handsets every month. For Cashify to replicate this kind of success, it needs to convert India’s large unorganised smartphone resale market. This won’t be easy. And while Cashify has solved the supply side of its model, it has a lot of work to do on the demand side.
Buy online, sell offline
Cashify was born in 2014 as a platform for selling and buying used laptops. But with laptops being churned slower (on average four years), co-founders Mandeep Manocha and Nakul Kumar realised they had to move towards a faster-moving category.
Enter, smartphones—a space going through an aggressive growth phase, with multiple Chinese brands such as Xiaomi, Oppo, and Vivo entering the country over the last half-decade. Smartphones are now Cashify’s focus. With churn rates high—down from two years in 2017 to around half that today—supply is abundant.
And as major smartphone manufacturers such as Xiaomi contemplate pulling out from the entry-level segment in their quest for higher margins, the demand for used phones will only be boosted, says Varun Sharma, research analyst, Counterpoint research.
E-commerce platforms, which were gaining momentum as popular channels for new smartphone sales, were also getting a lot of used phones in exchange deals. Cashify went ahead and tied up with India’s two largest such players, Amazon and Flipkart, sorting out its supply woes. Today, 50% of its supply comes from online channels.
While online channels are an easy source of supply, there is also a lot of competition. These phones are sold through an auction process, meaning whoever bids the highest gets the deal. Some of the earlier players in the used phone space depended heavily on online channels and eventually found themselves squeezed out as the number of bidders increased.