ControlZ, a Delhi-based renewed smartphone startup, said that it has an in-house capability to renew smartphones, and wanted to make old devices aspirational for consumers. The company is also looking to hire nearly 400 individuals in the next 2 years. In an interaction with The PageOneAsia's Thomas J, ControlZ Founder & CEO, Yug Bhatia talks on refurbished market, offline retail foray, revenue targets and investment. Edited excerpts:

What is the story behind ControlZ's formation, and how have you come into this segment?

We started working on this in June 2020. As of now, it is two and half years since we invented ControlZ. It started off when I had experience in selling refurbished phones on marketplaces when they were launched in 2019. So all the online refurbished phones were launched in 2019, when Flipkart and Amazon started selling refurbished as a category. With a slight experience in selling these phones in the marketplaces, I started coming to my father’s office and he has a background in electronics distribution. Later he started his own electronics brand called Detel. So this is how I got introduced to the industry. The company’s name is SG Corporate Mobility, we have a brand called Detel electronics and now the company is focused on electric vehicles. We are also launching LML in September and then Detel is also committed to making EVs. So, we are EV centric with experience in selling refurbished phones on Amazon and Flipkart.

When this category was introduced, everyone had high hopes and thought that it would be a big success. Even the big players thought this would be a billion-dollar industry, so they put in a lot of money, created new brands, and also created new marketplaces. Since it was successful in America and Europe they thought it would be successful in India as well. And here I’m talking about the refurbished market. But after a year, as a seller I saw that it wasn’t going to be a successful market.
 
So, how big is this market?

Right now the refurbished market as per the 2021 data is $0.1 billion in India. Now it might have increased 10-20 %. But if you look at the new smartphone market it is worth $35 billion . So if you compare the new and organised refurbished market, it is less than 0.3% of the new market (.1 billion). However, if you will talk about the potential, it is $10 billion and the unorganised (pre-owned) is  $1.7 billion, and this can be 10-20 percent more, or a maximum $2 billion. But the refurbished market couldn’t grow as per the expectations of big players. And to be a seller, I had an idea that this cannot be successful. They believed that the marketplace and sellers will come to the same platform, thus it will grow. But if you try to understand the nature of refurbishment, it is basically when you buy an old thing and then you make some change to the old thing  and then you sell it again. It means you need a partner who can do the refurbishment - it is like a manufacturing job.

The bigger companies or brands are already service focussed. Do you think there will be activity in this segment?

So, there were companies that focused on service. There are only 1 or 2 companies in India that have good service models and these have the biggest marketplaces. In fact some of the companies are also good in aftersales.  But are there any refurbishment companies? At Least I don’t know any names.

This means there is no core activity. As a side business people are doing anything but there is no one whose core business is refurbishment. This was something that I saw initially only and the way the product was being sold was not promising. It was just like compromising with the notion, mentality was that if it’s an old phone then it is supposed to be cheaper, the box shouldn’t be in a good condition and so on. Though these are the minute things, these things only build customer experience. In fact the quality was also not so good because the marketplace simply distributes the model but the manufacturer is supposed to gather every component.
 
This is when we felt a need to provide the solution to this. What we are trying to do is to make old phones aspirational and bring a phone in the pre-owned segment that the consumer wants to buy and the person should not have to compromise on it. The target behind these refurbished companies in India were to sell to those who could not afford a smartphone. In India only 30-40% people have means to afford a smartphone, and according to me I believe that it is not possible to target the people who could not even afford a smartphone as with the current financing options available in the market, if a person is not able to afford the phone. Then it is impossible for them to have a network connection for that particular device, which I felt won’t add much value to any person’s life.

And as an organised player when you are trying to substantiate things, the major competitor becomes an unorganised market and you cannot match the competition as there is minimal cost involved to them for reselling the repaired and unconditioned devices.

Do you refurbish these smartphones in-house?

We cannot call it refurbishment, as what retailers do in majority cases is that they resale the product in the same condition as they procure it. They sell it on their own guarantee to exchange in case of any issue, as they procure it so cheaply and sell at a higher price that all the margins are covered and they are always at a profit and this is the current structure of the market today. But if you see at an organised level, is there acceptability of a refurbished phone in the mass market? As far as I understand, people don’t buy refurbished phones in the mass market as the market is extremely concise.
 
As long as the product is not aspirational to the consumer, they will never buy it and this is how we decided to sell smartphones ‘As Good as New’. We had decided the phones we would offer would have perfect cosmetic conditions. The organized market sells the devices in four-five conditions, but our vision was to sell these phones in a brand new condition every time and to each customer of ours. With this vision and extensive R&D, it took us two years to perfect our procedure to ‘renew’ smartphones. Now I can vouch for it if you see a new product and the device offered by ControlZ you won’t be able to distinguish between the two.

ControlZ procure devices from buyback companies that collect devices from the previous owners of the devices. ControlZ doesn’t procure devices directly from the consumer. These devices are then renewed and sold in the market.

What is the reason for procuring old smartphones from these companies and not from customers?

Buying back is a separate business altogether, and since our core forte is renewing we don’t buy back. The product packaging we offer is completely free of plastic and 100% made with recycled paper and nobody else is providing such packaging, everybody wants to offer gloss or the matte, majority of which is plastic. We offer these smartphones with brand new charger adapters and charging cables produced in the highest quality possible, that we produce from one of our own companies.

How big is your workforce Including technical and R&D teams?

Right now 50 people work at ControlZ, out of which 40 are in the backend and the rest is the front end. This team at the backend renews the devices at ControlZ.

Do you also have any plans to expand the manpower?

For this upcoming facility in less than two years we will hire 200 people. In all, we would want to have a team size of 300-400 people in the next 2 years.

What is your go-to market strategy? How are you selling the phones?

We launched our brand in April 2022. Before that we had a backend that was working. Post brand launch we have started selling it via our website. We have ControlZ's website through which we are selling the phones. No third party is involved. We renew the phones and sell that directly to the consumers and deliver them directly. This phone is as good as new, has 100% battery health and we give an 18 months’ warranty. So let me tell you how this warranty works. For example, you bought this phone and you are in Kanyakumari and your phone is not working properly between that 18 months’ time span. In that case you just have to either call, whatsapp or mail us, the very next day we will get your phone picked up and will bring it to our main service centre which is in Gurgaon, and will do the servicing. All this process would take 4-6 days. We could have done the launch 2 years ago but we brainstormed and decided to do that after 2 years after understanding everything.

What's your revenue so far? Targets for the coming year?

Our first quarter was about Rs 6 crores. For this year, we are confident to do at least Rs 30 crores, and more than Rs 80 crore for next fiscal year. Our product’s ASP is little less than 20,000.  

How do you decide the ASP as you said that in this market segment, you don't have any competitor?

We don't have a direct competitor, there are people who sell refurbished phones but they don't have any comparison to this. It is an old phone actually which is quality checked. But it doesn't have all of these things. Our competition is 100% with new phones. The main consumer issue which we see isn't the price because the price in which we are selling is accepted by the clients. The price is roughly 40-50% less than a new phone. We sell the phones which Apple has stopped selling by the nature of the business. For instance, iphone10  doesn' have any market price , the price is conceived by the customers. iphone 10 was launched in the market at the cost of 90 thousand rupees. But today maybe it would not have the same market price if it was available in the market.

Are you looking for any investors or fundraising?

Till now we have run as a cash flow positive business so all the growth was funded by us organically, we have raised money from HDFC bank that is little less than $2 million (about Rs 16 crore) and as per the requirement of our expansion plans we are in talks with them for raising another $2 million dollars in this fiscal year. We are trying to increase the working capital, since we don’t want to dilute with many investors at this stage.

What brands are you focusing on currently?

At the moment we are renewing Apple and Oneplus devices only as these are amongst the top two premium brands in India.
 
Do you have targets in terms of volume?

Definitely, the facility that is going to come up will be increased in 2 phases and that facility is going to be capable of 3,60,000 units.

Since you compete with new devices and your ASP sometimes comes closer to Rs 20,000, are you in talks with any of the smartphone financing firms?

Yes we are in talks with everyone, probably by next month we will close it. Online response is good and it is something we see growth from.