Ever wondered what happens to products that are returned due to negligible defects? Or the ones returned because they developed minor faults soon after purchase? These products make their way back to the manufacturer and end up languishing in the warehouse. Hitendra Chaturvedi, an engineer from IIT Roorkee, sensed an opportunity here and launched GreenDust – a reverse logistics firm to manage the return processes. GreenDust collects such products from the manufacturer, repairs the flaws and then offers them to the customers at reasonable prices, as factory seconds.
While the concept was, and to quite an extent still is, new in India, Chaturvedi, who post his engineering degree went to the US for a Master’s degree, had the required experience having worked in reverse logistics firms there. Later, his stint with Microsoft brought him to India where he headed its OEM business and worked for about two-and-a-half years. During his stay here, he closely observed the reverse logistics processes and noticed that there was a huge gap when it came to managing the process of returns. Then in 2008, when Microsoft wanted him to come back to the US, he decided to quit and form his own company.
Hitendra Chaturvedi, Founder GreenDust
He observed that there was a lack of organised approach when it came to handling returns and most of the companies handled it very haphazardly. The reason he believes was due to the low volume of returns for the manufacturer on the process of reverse logistics. While explaining the importance of reverse logistics, he points out the risks of negligence on the part of the manufacturer. He says, “At the warehouse level, they call a few scrap dealers, haggle over a price and sell off the products. They close their eyes to the implications and repercussions of what those scrap dealers would do with the products. Junk dealers may repair or refurbish the products and move them to the new product supply chain. People may end up buying products that are factory seconds at full price. There are many local dealers who sell these products.”
If a consumer ends up with such a product and has a bad experience with it, the brand has to bear the brunt. GreenDust thus provides a simple solution by taking the returned products from the companies, and later makes them available at competitive prices to price conscious customers. Chaturvedi says, “In simple terms, anything happening to a product after the point of sale is termed ‘reverse logistics’. A customer finds a defect in a product: servicing, repair, return, transportation of the returned item, refurbish, re-sell or e-waste are all part of reverse logistics. We get into agreements with many large OEMs, where we manage the entire process of returns: right from acquiring the product from the customers and repairing and refurbishing it using genuine parts, to certifying it as factory second.”
It has about 100 franchisees and 1,000 dealers
He explains further, “We have two models: we purchase the product outright; or we share the revenue. We don’t have any agreement with the OEMs on pricing because selling factory seconds means that our products have to be at least 25 to 30 percent cheaper than those in the market. We sell the products through dedicated GreenDust franchises that clearly state the fact that they are refurbished factory seconds outlets. A one year warranty is provided by GreenDust, and not by the OEM. So we have created a whole new channel for factory seconds and refurbished products so they don't cannibalize the sales of the new products of the OEMs.”
Every product sold via GreenDust has to pass through a stringent test process. Chaturvedi explains, “Most categories we move are consumer electronics, home appliances, IT products and mobile phones. We inspect the product to check whether it can be re-used or scrapped. If it is a scrap item, we don’t pick it up. The products that we pick up go through our fifty-point inspection program in which each function is checked. The OEMs' fault rate with new products is somewhere around four to five percent, which is also the return rate. Our fault rate is about 1.8 percent, as every product is thoroughly checked. We look for cosmetic defects as well as functionality issues.”
Interestingly, GreenDust does not re-touch dents or scratches as long as they do not affect the functioning of the product. Chaturvedi states that if all the problems and blemishes are fixed, the customers will be suspicious of why such huge discount is being offered. He says, “They'd think something must be definitely wrong with the product. So, we leave out the minor blemishes and scratches. When customers come to us, we make them aware of exactly what makes it a factory second.” Even on the site, when you click on any product, as a part of the description you will find the information whether the product is ‘refurbished’, factory second’, ‘surplus’, etc.”
The site offers some good discounts and combo offers
On the site you will find a discount of over 50 percent on some products, which can naturally arouse suspicion. In fact, gaining customers’ trust was not an easy task and they also had to deal with the mental block against buying anything second hand. Chaturvedi admits that it was a challenge convincing consumers about the products’ worthiness. He says, “When we started, there was some reluctance to buy factory seconds because people had had bad experiences after buying them at places such as Nehru Place and Lamington Road. You get a discount, but the product is always very shady. Our repeat customer base is over 50 percent. We also provide an after-sales service. When a customer is not satisfied with the product, we proactively replace it or give the customer a full refund. That is how you build a brand. Gaining trust is very difficult, and I believe, it is a long process. Warranty has become a very big factor. Still, the price is the first catch and warranty the second.”
The success of GreenDust can be gauged by the fact that it today has tie-ups with brands such as Dell, HP, LG, Samsung, Toshiba, Phillips, Panasonic, Wipro, Acer, Futurebazaar and HomeShop18. It has a presence in big cities such as Mumbai, Delhi, Bangalore, Chennai, Ahmedabad and Hyderabad, besides several tier two cities. In addition to 15 value added centres, it has about 100 franchisees and 1,000 dealers. Speaking about his vision for GreenDust, Chaturvedi says, “We are planning to reach out to many more OEMs, and convince them of the value that we can create for them, and that we can manage their returns. We are also planning to expand into more stores and increase our online presence. We have the aspiration to go international.”