India's largest online retailer, Flipkart, wants its customers to buy a new smartphone every year. The Bengaluru-based company is launching an exchange programme, starting with smartphones and television sets, that it expects will drive 20% of the sales in these categories by the end of this year.
Flipkart, which says it sells one out of five smartphones in India, expects handset sales to hit 100 million devices this year, but fears sales will begin to taper after that. "Then the only way growth will come is with churn," said chief business officer Ankit Nagori
"The average cycle in India for (replacing a phone) is 18-24 months as opposed to Western countries, where it is 12-18 months." Mobiles devices and fashion products have emerged as the largest categories in India's online retail market, which is estimated to expand to $36 billion (about Rs 2.45 lakh crore) in 2016-17 from $11 billion in 2014-15, according to Goldman Sachs.
The smartphone category is the largest in terms of contribution to gross merchandise value, or GMV, for Flipkart. It has had a number of exclusive tie-ups with phone makers including Motorola, Xiaomi and most recently, LeEco, to first launch their phones in India, and also has popular phone models from Lenovo and Samsung exclusively on its platform. The exchange programme will be available throughout the year and Flipkart plans to launch special 'Big Exchange Days' schemes on the first two days of every month. The company has started pilots for this and is already seeing one out of 10 phones being bought are through the exchange programme.
The etailer, which says its annualised GMV for this year is $12 billion, plans to sell the collected devices to the original manufacturers and second-hand mobile sellers. Ekart, Flipkart
in-house logistics unit, is expected to make over 90% of the deliveries and collections under this programme.
For television sets, it plans to work with after-sales service provider Jeeves Consumer Services. Industry experts peg the size of India's second-hand phone market at 30% of the new phone market. But it also has its own challenges. "There are issues in this market (such as) if delivery boys are able to test if the phone they collect is the same model (as offered in exchange) and is fully functional," said Annkur Agarwal, CEO of mobile price comparison website Pricebaba, which is also running pilots in the second-hand phone market.
, Ankit Nagori
, Goldman Sachs