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Second-Hand Market To Cross Rs 1,15,000 Cr By 2015

Monday, January 20, 2014
By A Business Reporter

Economic slowdown creates higher demand for second-hand goods and machinery

With economy slowing down and cost of capital remaining high, the volume of India’s second hand and recycled market including consumer products, automobile and industrial raw material & machinery, is likely to grow up to Rs 1,15,000 crore in  2015 from the current estimates of Rs 80,000 crore,
According to an ASSOCHAM  paper,when it comes to consumer items, the rise in income may not be commensurate to the rise in aspirations and the insatiable aspirations are leading them to the second-hand market to fill the gap.

“Whether consumer goods like electronics, durables or automobiles – used cars, or the industrial machinery in the capital goods sector, the options of retrofitting and re-usage are being considered more actively than ever before”, said  D S Rawat, Secretary General ASSOCHAM, adding that high interest rates, risk aversion and subdued investment appetite have led to this state of ‘second hand’ culture.

The second-hand market (used good market) in the country is estimated at around Rs 80,000 crore including the automobile segment. While releasing the paper Rawat said, India’s second-hand market (used good market) was worth about Rs. 60,000 crore in 2011, it went up to Rs. 69,000 crore in 2012 and to Rs. 80,000 crore in 2013 and is expected to touch whopping Rs. 1,15,000 crore by 2015 with the compound annual growth rate (CAGR) of about 15%.

"With the current economic slowdown, majority of household look for cheaper alternatives for everything. Nearly 45 % of the respondents said buying second-hand goods from reliable platforms is worthwhile," said respondents who bought their household goods from second-hand trade store. “Needs have multiplied but income hasn't," said majority of the respondents justifying their choices.

For a largely floating community of young professionals in metropolitan cities unwilling to compromise on their lifestyle needs. The second-hand market offers a more convenient and financially viable means of shopping, adds the paper.

“Brand buy-backs, exchange schemes, online platforms and mobile marketplaces offer smart and convenient options for consumers keen to ‘trade in to trade up’, alleviate financial strains and/or quell environmental and ethical concerns,” it adds. 

Rawat further pointed out that it's not just incomes that are driving second-hand markets. The product cycles are smaller and durability is coming down, which has also given a fillip to second-hand markets. Now, shorter life cycles of products, the replacement demand has gone up, and low-cost new products and second-hand markets have become substitutes, added Rawat.

The entire second hand market is slowly moving from a highly fragmented business to a more organised avatar, said Rawat. Till eight-ten years back, the second-hand market in the country was primarily driven by local specialized second-hand zones like Chor Bazaar in Mumbai, Daryaganj in New Delhi etc.

The demand for second-hand consumer durables, especially the lower priced items like mobile phones, seems to be dipping. Although the demand for textbooks, tablets, DVD, and other high-end handsets remains robust, there are some product categories that are still going great guns like second-hand text books etc, adds the paper.

Women are more likely to buy second-hand books, luxury goods items, apparel while men are more likely to buy second-hand CDs, DVDs, used car, motorbikes etc., adds the paper. In making a choice between buying new or used, 18-24 year olds are the most likely to opt for second-hand DVDs and CDs as a first choice, while the over-55s prefer to buy these new.

Most dealers across major cities also said that sales of second-hand products in categories such as refrigerators, ACs and washing machines are definitely lower than what they used to be, especially for the past one or two years, adds the paper.

The used-car market in India is highly fragmented; only 20% is organised. There are authorised dealers such as Maruti's True Value, Hyundai's Advantage and Honda's Auto Terrace etc who have easy financing options. But higher prices, due to warranty and quality checks, are a deterrent and many invariably opt for the unorganised segment. However, this segment is likely to grow with more players likely to join the potential market. Mercedes, Audis and BMWs continue to be favourites amongst the category of second-hand luxury cars while Skoda and Volkswagen cars are most the sought-after in the slightly low-end brands, adds the paper.

Growing aspirations of the middle class and the dream of owning a car have fuelled second-hand car sale and spurred the growth of the used car market. While the organised trade accounts for 20 % of the total volume of sales, the unorganised trade accounts for the remaining 80 %.

The paper further pointed out, there's low organised second-hand market for consumer durables in India, ASSOCHAM experts say 25-30% of the product lines in each of these segments get upgraded every year, and the shorter product cycles translate into increased replacement demand. While fridges, washing machines etc. witness moderate demand, LCD TVs seem to be selling like hot potatoes, adds the paper.

The paper further pointed out, the market typically consists of second-hand dealers coordinating with showrooms and picking up items junked by customers as part of an exchange offer by a retailer. Dealers further said that with the hike in petrol prices has also added to the growing interest of people in the used car market instead and people are coming out to look out for better deals instead of investing double the amount on a new car.

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