Old Is Gold

...to raise their social status. Leading sub-distributors and dealers in the country are supporting this business by launching lucrative exchange offers

Old Is Gold”, is a popular saying. Yes. It is turning out to be a golden
opportunity for resellers to deal with old computers and rake in the moolah. Old
computers or used PCs are not only getting popular among user segment but even
among the resellers, who are now entering this business in large numbers. In
fact, many leading sub-distributors and dealers in the country are supporting
this business both directly and indirectly by promoting buy-back schemes
(exchange offers) in trade. Slowly but surely, India is becoming a big market
for used PCs, thanks to the country's population of more than one billion
people, who are fighting hard to raise their social status.

Overall, India is progressing well on all fronts and we cannot miss to
mention here our success story in information technology (IT). The sector is
making a heady growth year after year and raising the bar, only to make the
world sit up and take notice of a more confident India, led by IT. The country
is becoming the IT services hub for many global companies. Information
technology has created not only more jobs for India but, touched every aspect of
human life and made changes to it. In one line, India is on the threshold of IT
revolution. And, more and more people are looking up to IT to change their
lives.

PC boom in India

The growing awareness of IT has prompted people to invest in computers, which is
a basic device. Computing these days has become all pervasive. India, which had
an installation of only five million PCs in 2000, is now an opportunity for five
million computers this year alone. PC penetration is increasing in India and
both, metro and rural markets are opening up. Large-scale IT awareness is
bringing in users from all segments and all markets-such as class A, B, C, D
and E cities.

Used PCs: A big opportunity

Used PCs (or second-hand computers) business is getting popular in India, mainly
in the upcountry markets. Why? As IT penetration/awareness increases across the
country metro consumers are upgrading their lifestyle-by buying latest gadgets-thus
the number of obsolete computer is growing exponentially. Meanwhile, people
living in the rural areas who cannot invest a big amount of money in buying new
computers are showing great interest in buying used PCs. In fact, many
schools/colleges and other institutions in these areas are major customers for
this product. Seeing this opportunity, a select set of channel partners in metro
and upcountry markets are keen on dealing in used PCs.

“Second-hand PC market is here to stay till PC penetration in the country reaches its upper limit. We strongly believe that this business will flourish in the coming years as more and more home users and companies, mainly in class B, C and D markets, will automate their business. Used PC is a big opportunity in India for dealers.” Deepak Kudesia, Bills India

These days the dealers in metro cities are not only buying used PCs from the
local market, they are also importing them from foreign countries such as the
US, Europe and Singapore, to meet the growing demand. Chennai, Visakhapatnam,
Mumbai and Cochin in India are some of the hot markets for importing since they
have excellent port connections.

Meanwhile, common IT resellers are also driving this business by buying old
computers from customers (in exchange offers) and selling it to these select set
of channel partners. Overall, this business is flourishing, as though the IT
penetration in India at the moment is just two percent but it is growing each
day. There are millions of people who are waiting to buy computers for their
homes and used PCs are becoming a viable option for them, mainly because of the
cost factor. An interesting fact is that even metro consumers are buying used
PCs to have one exclusively for them (to save their data/information), while
their kids play (fiddle around) on the new P4 machines (high-end games can be
loaded only in the latest machines).

“There is no DoA (dead on arrival) and warranty/replacement concept here. The dealer should also be aware of the supplier information and the origin of materials, since free-flow of illegal goods is possible, which could invite trouble later. Frequently falling PC prices, service and support issue are the other pain areas for dealers in this business.” S Lingeswaran, Hitech Computer Center

Channels speak

Channels have been operating in the used PC space from as early as 1993 and what
started with select resellers dabbling in this segment has now grown into a
full-fledged business concept, inviting and attracting more partners into this
business everyday. According to Jitubhai Patel, a leading second-hand PC dealer
in India who runs a firm by the name of Jitubhai Joone Computerwale, “When I
started this business 10 years ago, there were only about 15 players dealing in
used computers. But, today, there could be more than 350 channel partners across
India involved in this trade. Though, pure play second-hand PC dealers are less
in the market, many channel partners are supporting and driving this business,
both directly and indirectly. India is a big market and there is a huge
potential for used PCs.” Patel's Jitubhai Joone Computerwale has three
offices in Mumbai and operates with a network of 25 franchisees across the
country.

For Deepak Kudesia, Director of New Delhi-based Bills India, the idea of
dealing with used PCs was born when he visited the US in 2002. “I found a good
opportunity to import second-hand computers from that market. US being an
advanced country people are constantly upgrading their lifestyle by going in for
new and latest-technology products. Back home, we are very cost conscious and
spend only for what is required. Meanwhile, rural folks in India cannot afford
to buy new systems for their home. So, we decided to import from the US, Europe
and Korea and supply it in India, where PC penetration and IT awareness are
growing at a blazing speed.”

Like Kudesia, Patel is also sourcing materials from overseas markets such as
China and Singapore, to mention a few. “People in the overseas markets discard
their systems as soon as it becomes obsolete and move in for latest gadgets. In
fact, we make it a point to travel to all international expos like Computex
(Taipei), CeBIT (Germany) and PC Show (Singapore), mainly to develop contacts
abroad and source second-hand PCs from there,” said Patel.

Apart from international markets Patel is also sourcing materials from the
local market. “We procure some goods from customs department, where seized and
unclaimed materials are auctioned regularly. We are also in touch with many
companies here who clear their old stocks annually,” he added.

Used PCs are very popular in the upcountry markets and also among metro
customers, mainly in the home segment. “We got into this business only because
we had some contacts in the upcountry markets. Rural is a big opportunity to bet
on,” said Anil Khatri, CEO, Saitech Enterprises.

Though PC prices are falling regularly and quoted within the much-hyped Rs 10K
bracket, still a large section of people in the country believe it is a costly
option. For them, used PCs are a boon. Second-hand computers are bought across
the industry segments, right from home user to SOHO; SMB to educational
institutions; call centers and other business outfits.

“We have supplied used PCs to local call centers who have a seat capacity
of 100-150 people. Our other customers include cyber cafes, private schools,
data entry operators, business users and home. Some small medical transcription
units have also bought systems from us. Overall, there is a good awareness among
buyers about used computers and its benefits,” said Patel.

“We generally offer buyback schemes whenever a vendor announces it.
Recently, we promoted Zenith products through exchange offer and the second-hand
PCs bought under this scheme are being utilized in two ways. One is by selling
these PCs to educational institutions and home segment where they do not require
very high configuration. Secondly, used PCs find usage as substitute for spare
parts in our annual maintenance contracts,” said Sandeep Jain, CEO of Kanpur-based
Aryan Computers.

Both, assembled and branded second-hand machines are available in the market.
And, products from brands like HP, IBM, Dell and Zenith are some of the fast
moving goods. “We sell over 1,000 machines a month and the fast moving models
are P3 and P4. We sometimes supply computers with a configuration that have
never been launched in India. And, upcountry dealers from markets such as
Rajasthan, Gujarat, Madhya Pradesh, Haryana and Punjab are our major customers,”
said Kudesia.

Issues & challenges

The opportunities and profitability are good in used PCs, similarly the risks
too. Unless one knows the market and sourcing techniques, it is tough to survive
in this business. In fact, there are many issues and challenges that can be
listed out.

“First, whenever the dealer sources a material, he should do a lot of
verification and checking before buying, as failures in systems will lead to a
big loss. There is no DoA (dead on arrival) and warranty / replacement concept
here. The dealer should also be aware of the supplier information and the origin
of materials, since free-flow of illegal goods is possible, which could invite
trouble later. Frequently falling PC prices, service and support issue are the
other pain areas for dealers in this business,” said S Lingeswaran, Proprietor
of Chennai-based Hitech Computer Center, a leading used PC dealer in South
India.

However, Kudesia says, “Every business has its own pluses and minuses.
Second-hand PCs are selling like hot cakes and customer patronage will be there
only if they are satisfied with it. The failure rate of second-hand machines is
less and it also offers upgrade option for the customers.”

The road ahead

The used PC market is growing, no doubt about it. Most of the second-hand
computer dealers are happy to be in this trade, though there are margin
pressures in this business. India is a big country with over one billion
population and the PC penetration is just two percent here, which spells a huge
opportunity for every player in this segment.

“There are thousands of satisfied customers with us, who thank us for
providing systems at low-cost and which are working perfectly well. We also
breakdown the PCs and sell it as components, as again there is a good market for
it from users. Overall, it is a very profitable business compared to general IT
trade,” said Patel.

“Second-hand PC market is here to stay till PC penetration in the country
reaches its upper limit. We strongly believe that this business will flourish in
the coming years as more and more home users and companies, mainly in class B, C
and D markets, will automate their business. Used PC is a big opportunity in
India for dealers,” added Kudesia.

S Gopikrishna With inputs from
Nelson Johny in Mumbai and Anjali Choudhary in New Delhi