Flipkart is taking a second shot at selling used goods in India. Will it do any better this time?

Merely a month after exiting it, India’s largest homegrown e-commerce firm has reentered the country’s over $17 billion second-hand goods market.

On August 22, Flipkart launched 2GUD, an independent portal that sells refurbished products.

The Bengaluru-based company had on July 24 shut down eBay India, a portal that let Indians sell new and refurbished goods. Flipkart had acquired eBay India just a year ago.

But 2GUD is different from eBay: the focus is initially only on high-selling electronics.

“The product portfolio of 2GUD would initially include smartphones, laptops, tablets, and electronic accessories, and several more categories will be added soon,” the company said.

Experts believe the strategy is likely to work. “Flipkart wants to become the preferred destination for second-hand smartphones to start with,” said Satish Meena, an analyst with Forrester Research. In addition to strengthening its presence in the new smartphone retail market, it is going after the growing customer base upgrading from feature phones and basic smartphones to smartphones and more expensive smartphones through the second-hand route, he added.

However, the market is pretty crowded.

Second-hand boom

In the online second-hand sales segment, OLX and Quikr are the market leaders in India, while companies like Greendust offer customers open box, surplus, overstock, and refurbished products.

Lately, several new entrants have joined the party.

In January 2017, Amazon launched its “Sell as Individual” service, allowing users to sell second-hand items. It picks up products, packages them, and ships them to recipients for a nominal fee.

Gurugram-based ShopClues also sells refurbished and unboxed goods. So far in 2018, it has sold an average of 5,780 such phones every month, 35% higher than in 2017.

But there’s still room for more players, some say.

“Second-hand has always been a big market in India, be it official or the grey market, and it [2GUD] leverages their [Flipkart’s] core capabilities of e-commerce and distribution,” said Yugal Joshi, vice president at the consulting and research firm Everest Group. “This is a pretty good adjacency that they are exploiting.”

The smartphone play

Focusing on devices will help Flipkart strengthen its position.

It is already the country’s leading portal for smartphone retail. Given that the refurbished smartphone market is growing rapidly at 400% year-on-year, the company is making a place for itself across the spectrum.

Unlike in western markets where brands such as Apple have their own servicing and repair outfits, the mobile phone repair market in India is still largely fragmented and informal.

Last year, Flipkart acquired mobile phone repair chain F1 Info Solutions as part of its attempt to standardise the ecosystem.

Meanwhile, Flipkart plans to go beyond just devices.

Flipkart’s 2GUD

It plans to introduce 400 more categories on 2GUD, according to the website.

While clothing, books, and furniture would be the obvious categories to add, Flipkart might even enter entirely new segments. For instance, used vehicles. “That will be a big market, and they will end up competing with players who they have never competed with. It is an interesting and complex foray,” Joshi said.

The company could also explore the business-to-business retailing segment. “Whether they only do business-to-consumer or business-to-business also will be interesting to see…The company might also soon start bundling products across the two different websites to reach a wider range of prospective customers,” Joshi added.

But where’s the money?

The company will face challenges, though. The second-hand goods segment is a money-guzzler, particularly for a venture like 2GUD that intends to take the responsibility for quality checks and warranties.

“You have to do a lot of due diligence and repair before the product hits the market,” said Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research. “That’s a sore point in the overall ecosystem. It does require a certain amount of monetary spend before you can start making money back.”

For 2GUD to succeed, Flipkart will have to rework its distribution and supply chain network to include the second-hand goods.

“Electronics has become very cheap of late, so they need to have a differential and they need to be very judicious about what they sell and how, so there has to be some good market research behind it,” Joshi said.

This article first appeared on Quartz.