The ubiquitous Chor Bazars - markets primarily meant for stolen goods - that dot almost every Indian city have shed their ominous ring and gone mainstream.
Together with fly-by-night street vendors and several online start-ups, they have helped feed an ever-growing demand for second-hand products, pitch-forking the business in recycled goods into a shining example of India's growth story.
A recent report released by the Associated Chamber of Commerce and Industry of India pegged the market for second-hand and recycled products in India at Rs 80,000 crore ($12,814), up from Rs 69,000 crore ($1,1027m) in 2012. The report further estimated that the market would cross Rs 1,15,000 crore ($18,379m) by 2015. The market has recorded a growth of 15 percent per annum.
If you look at mature markets versus Indian markets, the upside opportunity of the used car market in terms of volume and growth is enormous
The impressive figures ironically add gloss to a business segment that essentially deals with products often battered and bruised, and that are definitely not new and glowing.
The reasons driving this growth story are not far to seek. The consumer, who is at the centre of all the action, is caught in a situation where his income is not in line with rising aspirations and prices.
Brand buy-backs with attractive incentives, exchange schemes and mushrooming platforms that enable easy and quick transactions are luring him to seek immediate gratification. And with demands skyrocketing, the market is evolving to meet it.
One of the early movers has been the automobile sector. As Nagendra Palle, CEO of Mahindra First Choice Wheels Limited, which has 300 multi-brand used car outlets across the country, says: "Our estimates of the used car market in India is roughly 2.8 to 3 million units per annum. Of this, about 15-16 percent is in the organised sector. The market is recording an annual growth rate of 22 percent."
There are reasons why the organised sector is upbeat about these figures. Explains Dr Palle, "If you look at mature markets versus Indian markets, the upside opportunity of the used car market in terms of volume and growth is enormous. Typically, every car sold becomes the base for the used car market. In India the ratio is 1.2 : 1. In the US, it's 3:1.
"The new car market in the US is roughly 15 million units and used car market is almost 42 million. If you think of India as an emerging market long term, there is a lot yet to come. That's why we feel it's a good opportunity."
Detailing out major trends in the market, he says, "There is an increasing demand for used cars as customers get more comfortable with the buying experience. Essentially, the consumer wants the vehicle condition to match the specifications in the advertisement or literature, the vehicle papers to be in order and finally the price has to be right.
"As the business gets more organised, automobile companies are providing a platform with transparent pricing and additional reassurances like a warranty. These are the things that help build the customer's comfort level. In fact, the inventory period at our dealerships is only 25 days."
The other big trend in the second-hand car space, Dr Palle says, is that the economic downturn has increased the demand for small cars. However, the ownership cycle of a vehicle that used to be 72 months about five years ago now stands at 48 months. By 2017, this is expected to further dip to 40 months.
First time buyers account for roughly 60 percent of second-hand car sales. These are trends that clearly mirror mature markets, affirms Dr Palle.
Books and mobiles
Books and mobiles are the other leading categories in the second-hand market place. Estimated at over $2bn, the books industry in India is growing at about 20 percent.
Of this, more than 10 percent is estimated to be the size of the second-hand books market. And what is changing fast is the fact that second-hand books are no longer picked off the roadside vendor. There are instead proper stores and online options.
"There is a definite increase in sales as awareness grows. Over the last six months our sales have actually doubled," says Sharad Churamani, a post-graduate in business economics who started secondhandbooksindia.com about a decade ago
The venture sells books between the price points of Rs.29 ($0.5) to Rs.150 ($2.5) and handles 300-500 customers per month. While online sales are limited to roughly 1,500 books per month, offline sales are about 7,000 books per month. Most sales are to libraries and schools.
Adds Mayi Gowda, a qualified engineer, who owns a large second-hand book store Blossoms in Bangalore, "We have about 300,000 books in our store of which 80 percent are second-hand and five percent are rare books. The margins in second-hand books are very good."
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"Today even with competition from online book sellers offering a discount and ebooks, sales are steady."
The online space has revolutionised the way second-hand products are transacted.
"People are not comfortable buying automobiles online. But they use it to research cars before completing the transaction physically. Online channels are also used by our dealers to advertise and to purchase second-hand cars. It is therefore an important factor in the second-hand products space," says Palle.
Online marketplaces, however, seem to be popular with customers for mobiles, computers, laptops etc. OLX, an online classifieds site, has over two million listings for mobiles and over half a million plus listings for computers, laptops etc. Quikr, another such website, states that the most popular categories on the mobile site are mobile phones, cars and bikes, while on the desktop site, real estate, cars and bikes are the most popular.
Online market places have the maximum listings in states like Maharashtra, Uttar Pradesh, West Bengal, Karnataka, Tamil Nadu and Gujarat. "Today, tier two and three cities like Bhubaneswar, Ghaziabad, Faridabad, Kozhikode, Thrissur and Guwahati account for over 5 percent of the site traffic," a note from Quikr states.
With sales booming, there is sudden realisation that old is gold. And as demand for second-hand products grows, even Chor Bazars no longer are out of bounds for aspirational Indians.
Source: Al Jazeera