Broken electronics invariably end up in scrap yards, contributing to e-waste. Hitendra Chaturvedi saw an opportunity in that. He decided to take those defective products — be it from retailers, companies or individuals — diagnose the problems, repair them, provide them some tender care, and then resell them as near spanking new.
It's a business that he started in 2008, at the height of the global recession. And it has proved to be so successful that he expects to end this fiscal year with a revenue of Rs 300 crore. "It took us a while to educate customers about retailing factory seconds. But we reassured customers with a one-year warranty and genuine parts. My products are also always priced lower than a brand new product of the same make," says the IITRoorkee graduate.
Chaturvedi grew up in different parts of India, his father having been in a transferable job with the Army's supply corps. After IIT, he did an MBA from Southern Methodist University, Cox School of Business, in the US in 1995, and then worked with Ernst & Young and AT Kearney. But it was a three-year stint with Texas-based reverse logistics company Newgistics that changed the course of his career.
"When I was working with AT Kearney in the US, I was approached by a VC company based out of Texas, to be a part of the founding team of a reverse logistics company (Newgistics) that they funded there. The CEO of the company asked me to define supply chain and I gave a standard dictionary definition. But he told me that I had only got half the answer right because I didn't define reverse logistics," he recollects.
In was in Newgistics that he learnt the nuances of reverse solutions, asset recovery and how it impacts retailers' bottom lines.
Reverse logistics is the process of taking back products from end customers, and refurbishing them. After three years with Newgistics, Chaturvedi joined Microsoft in the US and went on to head its $400-million OEM division in India till 2008.
It was around then that Mark Twain's words rung heavily in his mind: "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did. So, sail away from the safe harbour. Explore, dream and discover."
That persuaded him to take a plunge into entrepreneurship, and thus was born Reverse Logistics Company in New Delhi. "Four out of every 100 products shipped forward have to reverse their journey. Products are returned for minor defects, transportation damages or simply because it's a demo piece. We have created an alternative channel for factory seconds, and we sell them at at least 25% below market prices," says Chaturvedi.
Customers can buy the refurbished products online on Reverse Logistics Company's website called GreenDust or place an order through one of its 15 value-added centres and 100-franchise stores across the country.
The opportunity is huge as India has a 4-5% return rate, which translates into $12 billion worth of products returned every year. "Today, reverse logistics is seen as a step-child. Everyone's key performance indicators are aligned to selling new products," Chaturvedi says.
His venture has attracted significant funding — a testimony to the opportunity. He was seed funded by Mumbai Angels, and subsequently received funding from Kleiner Perkins Caufield Byers, Sherpalo Ventures and Vertex Venture Holdings.
The products sold are across five categories — home appliances, small home appliances (blenders and mixers), consumer electronics, IT (laptops, netbooks, tablets) and mobiles. Chaturvedi's dream is to become the eBay of reverse logistics and scale his business model to other emerging economies.
The company has tied up with leading brands like Samsung, Haier, Philips, Lenovo, Black & Decker and e-commerce company Flipkart to manage their product returns. "Companies don't see us as competitors. They have outsourced the challenging task of collecting take-backs from customers and retailers, and to unlock value from returned goods," Chaturvedi says.
LG, he says, is a Rs 20,000-crore company in India, and a 4% return rate translates into Rs 800 crore. Samsung is a Rs 15,000-crore company and a 4% return rate amounts to Rs 600 crore. "That's the kind of volumes we are talking about," Chaturvedi says.