 "Zefo")
Mayuri Jain shifted to Bengaluru last December to work for a multinational company. On a tight budget, she wanted basic second-hand furniture for her small flat. Travelling across the city to meet various sellers did not help. That is when a friend suggested Zefo.
Zefo Effort Technology debuted last August as an online portal for selling and buying used furniture and appliances. “We want to be the Amazon for used appliances the Urban Ladder for used furniture,” says Rohit Ramasubramanian, founder of Zefo. The start-up buys goods from sellers, refurbishes them and sells them on its portal at a fair price.
Zefo has received $6 million (Rs 40 crore) in Series-A funding, led by Sequoia India, with participation from venture capital firms Beenext and Helion Ventures, an existing investor.
Abheek Anand, principal, Sequoia Capital India Advisors, says the vision for Zefo is simple: Be the Amazon for used goods in India. “Anyone who has tried to buy, or sell, a sofa on these sites knows it takes time and effort. And, neither the buyer nor the seller trusts they are receiving the best price. Zefo solves this problem and this shows up in its exceptionally high customer NPS scores,” he adds.
Zefo is already unit economics profitable and has had 7x growth in the last one year. It pays sellers upfront, refurbishes the product, cleans it, checks if any work needs to be done, and sells it in a transparent manner. Defects are are called out on the portal. Zefo has over 30,000 customers and sells 400-500 products daily.
Opportunities
Ramasubramanian says the market for second-hand goods is inefficient. Most online platforms like OLX and Quikr aid in product discovery but the transaction has to be carried out by the buyer and seller themselves.
“We wanted to inject both trust and convenience. We wanted to solve the process fully. Our USP is that we are not a classifieds section but an e-commerce portal for used goods,” says Ramasubramanian.
The company says since the industry is fragmented its size is hard to predict. However, Zefo assumes the two segments it operates in are a $10 billion market.
Fact
The company plans to make the process more transparent, simple to use, and user-friendly. “Often with scrap dealers you do not receive a fair price. It is also tedious to go to them or to ask them to come home. We come, asses the items and offer you a fair price. You either accept it or reject it. We pay cash upfront, making us trustworthy as well,” adds Ramasubramanian.
Zefo has tied up with Flipkart and Urban Ladder to expand its business through exchange goods. Going further, it sees opportunity as the sector becomes organised.
Green Dust also works in this segment, however, its focus is mobile phones and it also deals with unopened goods for bulk dealers.
Business model
Zefo has a clear intention of making money and burning as little cash as possible. The company says margins are high and it is unit economics positive and on the path to profitability.
Within 15 months of launch, Zefo has over 40,000 customers and is growing at 40 per cent, month on month. “We have specifically taken this market because we wanted to make it efficient,” says Ramasubramanian.
Anand says the reason his firm invested in Zefo was the founders had presented a compelling vision. “One of reimagining how buying and selling of used products should work in India. Classifieds suffer from a problem of low trust and poor consumer experiences. Using a managed model, Zefo provides a dramatically better user experience,” he adds.
Challenges
The company says the big challenge is to keep the supply chain running. “We have to keep finding people who are willing to sell their products. Unlike general e-commerce, there is no vendor,” says Ramasubramanian.
Zefo is looking at tie-ups with e-commerce portals so that their exchange products come directly to it. Zefo has tied up with Urban Ladder for furniture and Flipkart for appliances. The system of exchanging used goods, setting a value to the goods and reselling them will be done by Zefo for these two companies. Zefo is looking at more such arrangements.
“For Zefo’s business, after-sales service plays a significant role. Emphasis on last-mile delivery is key and can be ensured through training and building skill sets of staff,” says Vikas Sharma, head of operations at Pepperfry.
Sharma says to balance cost and service, Zefo must invest in systems for inventory control, order tracking, customised vehicles for damage-free movement of goods, efficient route planning solutions and a multi-skilled carpenter squad to handle tasks like assembly and polishing.
Road ahead
Zefo wants to go deeper into large appliances. Started in May this year, the large appliances category is growing at a steady clip. The company is also looking at entering mobile resale, which it says is the largest segment in resale. The company has no deadline to enter this segment. Anand expects Zefo to reach $50 million in sales by the end of next year.
Expert take
The used-goods market has grown phenomenally. Demand is growing among millennials, who are constantly on the move and are price conscious. Zefo has built an interesting proposition to cater to this growing transient population. It has intelligently built a supply and demand generation model for those who want to get rid of their old furniture and those who want second-hand furniture for a short while. They are doing a good job of managing this cycle.
It is interesting how it has been able to cross the trust barrier, especially in a complicated category like furniture. It has done this by associating with reliable brands and communicating its proposition effectively.
It is also impressive to see how the brand is scaling up. Zefo launches in one city at a time but goes in deep to understand the dynamics of supply and demand in the market, all the while setting the bar high on the experience and quality.
Ashish Goel, CEO and co-founder, Urban Ladder.
