Babson Magazine

Spring 2016

Rethink, Repurpose, Reuse

The green economy often brings to mind solar-powered energy and alternative-fuel cars. These alumni are taking a different approach, doing their part to help the environment through businesses that keep products out of landfills.

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Our business model is about diverting electronic products from the landfill and getting them into the hands of somebody else.—David Chen, MBA’05, NextWorth

When consumers upgrade their electronic devices—opting for a newer cellphone, tablet, computer—the fate of their old devices has been shaped in part by David Chen, MBA’05, and his company, NextWorth, in Billerica, Massachusetts.

During the past decade, Chen’s company has helped pioneer trade-in, buyback programs that allow customers to turn in old products for cash or credit toward new devices. The program works like this: NextWorth partners with retailers, wireless carriers, and electronics manufacturers to set up trade-in and buyback programs. The partners then ship the used electronics to processing facilities, also partnered with NextWorth, where the devices are cleaned and refurbished.

NextWorth makes money in a variety of ways. It licenses the software it developed to run trade-in programs, and it sells revitalized devices back to retailers to be sold as certified, pre-owned products. The company also sells the products overseas, usually in developing countries where they might be someone’s first cellphone or tablet.

In some cases a turned-in device offers no value, so NextWorth works with certified partners to recycle the product in an environmentally responsible manner. “But our business model is more about reuse,” Chen says. “It’s about diverting it from the landfill and getting it into the hands of somebody else so it can be reused a few more times.”

The Right Stuff

When Chen was at Babson, he and classmate Andrew Walsh, MBA’06, considered launching a business to take advantage of the explosive popularity of eBay. They took a four-month hiatus from their program to work with a startup that helped less tech-savvy people sell their belongings on eBay. But the two soon discovered that the costs involved in acquiring and selling these items, including the time needed to educate customers about what would sell, were prohibitively high. The tchotchkes most people wanted to unload—say, Grandpa’s prized license plate collection—simply weren’t selling. “Instead, people wanted branded commodities, like Tiffany’s sterling silver, Yamaha keyboards, and the Apple iPod,” says Chen.

Chen and Walsh left that company, and, after graduating, established NextWorth with fellow student Scott Richardson, MBA’05. They decided to focus their business on used iPods, which they knew from experience would fetch a certain price, and launched as a Web-based business with an online calculator that showed how much NextWorth would pay for a particular model. They saw results quickly but continued to brainstorm low-cost ways to acquire the used electronics. Auto sales came to mind. “There are lots of ways to sell a used car—put it on Craig’s List, put a sign on your car—but nine times out of 10, people just take it to the dealership because it’s easier, and it reduces the purchase price of the new car,” Chen says.

They decided to try to partner with the “dealerships.” They approached the now-defunct electronics retailer Tweeter with their idea, explaining how their buyback program could help drive traffic into stores. Tweeter, which had hoped to salvage its floundering business in part by selling iPods, came on board. The idea worked. “In the fall of 2006, our revenue started to take off,” Chen says.

About that time, Apple called to tell Chen and his co-founders (who have since left the company) that it liked their concept. Apple introduced the buyback program to other retailers, and NextWorth soon decided to expand its buybacks to cover a range of products, such as gaming systems and laptops. NextWorth still maintains its online buyback calculator, in part because its website provides a place to test ideas and collect data that can be shared with companies. Which search engine terms result in the most hits? Which Web pages lead people to trade in their old electronics? But most of its business remains focused on retail.

A recent push for NextWorth has been partnering with stores run by wireless service providers and mobile dealers, including MetroPCS. “We really thought buybacks would be ubiquitous someday, and it’s certainly becoming that way on the mobile side,” Chen says.

At the same time, such companies are a growing source of competition as some decide to handle buybacks in-house. Chen refers to them as “sleeping giants that we’ve woken up.” Nonetheless, he still sees opportunities to continue partnering with them. “This is not necessarily core to their business,” says Chen, “and they will likely find out that it makes more sense to outsource this service.”

Chen is optimistic about his company’s environmental impact. When starting NextWorth, he and his co-founders had a green mission in mind and leveraged that message in their marketing. But in time, they learned that the environmental emphasis only resonated with a small group of retailers and customers. “As much as we wanted to push it, we had to be realistic about what the market wants,” he says.

They toned down the message in their marketing but didn’t change their mission. “We very much believe in reuse and recycling as a company,” says Chen. Data from the Environmental Protection Agency suggests that more waste from consumer electronics, once among the fastest growing waste streams, is being recycled. Chen believes reuse programs are helping. He keeps the company’s mission statement on the wall: “We want to fundamentally change the way people buy, own, and dispose of their consumer electronics.”

“I can say that we more or less achieved that,” he says. “Not necessarily on our own, but by creating awareness in the industry and getting the ball rolling.”

Shiva Kashalkar, MBA’11

At the end of the day, it’s just a great feeling that I’m doing something good for the earth and families.—Shiva Kashalkar, MBA’11, Green Pinata

Toys Galore

When Shiva Kashalkar’s daughter, Aanika, was 8 months old, Kashalkar, MBA’11, and her husband, Kiran, MBA’15, bought her a xylophone, a stacking toy, and some colorful plastic balls. Like many parents, they were hoping to encourage their child’s development. But in a week or two, Aanika already seemed bored. Kashalkar chalked it up to the fact that babies make rapid developmental leaps in their first year. Then the realization hit her. “We were going to have to keep buying toys for Aanika every few weeks to keep her engaged and stimulated,” says Kashalkar.

Toy rental struck Kashalkar as a logical solution, but she found just one company and was turned off by its offerings, which were mainly plastic toys. Kashalkar had read about the potential harm of ingesting chemicals in plastics, so she and her husband already had purged the kitchen of plastic products, such as food-storage containers and sippy cups. Watching Aanika pop those colorful plastic balls into her mouth, Kashalkar also had become more choosier about toys.

Seeing the entrepreneurial possibilities, Kashalkar last spring set to work founding Green Pinata, a subscription service based in her Wakefield, Massachusetts, home. For $24.99 each month, customers receive a box of as many as five high-quality, age-appropriate wooden toys through the mail. At the end of the month, they return the toys in a prepaid mailer.

Early on, Kashalkar consulted with Hannah Gardener, a Harvard-trained epidemiologist, now at the University of Miami medical school, with expertise in minimizing exposure to toxins at home. “Hannah helped me understand the toxins that we have to be concerned about when it comes to toys for young children and helped choose the best toys for our catalog,” Kashalkar says.

Green Pinata offers wooden toys that are painted with nontoxic, water-based dyes and have no plastic parts or batteries. The toys come from companies such as Hape, Haba, PlanToys, and Maple Landmark. When toys are returned, they are cleaned with soap and water followed by nontoxic, antibacterial cleansers. (Kashalkar says the toys stand up well to frequent washing.) They’re air-dried, and then stored and shipped in cloth bags.

She also worked with a child-development specialist to choose appropriate toys for each phase of a child’s growth. “Toys are some of the best tools we know of to engage and stimulate young brains,” Kashalkar says. “About 85 percent of the human brain develops within the first three years of life. It’s going through rapid changes during that time.” The company also emphasizes toys that encourage open-ended play, such as blocks, toy animals, and play-kitchen equipment. Child development experts say such toys foster imagination and problem-solving skills.

Sharing Is Good

Kashalkar is a fan of the so-called sharing economy. She uses baby-gear rental companies when traveling, for instance, and Rent the Runway for special-occasion clothes. The benefits are multifold. “Why waste money on something that you will use for so little time?” she asks. “Why spend to own toys that your child will play with for only a few days, and sometimes only a few hours?” Equally important, Kashalkar’s choices are about consuming and disposing less. “I really love the idea of reducing my family’s addition to the landfill,” she says.

The toy-sharing approach also can help families simplify. Kashalkar notes that she has friends with kids who have toys in virtually every room of the house. “Some people want to rent toys as a way to control the clutter,” she says.

Kashalkar plans significant growth in 2016. She’s working to attract external funding so she can scale up operations and move Green Pinata out of her basement into a warehouse. For now, Green Pinata has little competition. One company, Pley, recently acquired a competing business, Sparkbox Toys, but Pley currently offers toys mainly for kids ages 4 to 12, whereas Green Pinata serves families with children 6 months to 5 years old. Kashalkar foresees a day when Pley might enter the toddler market as well, but the company rents plastic and electronic toys, not the wooden ones available from Green Pinata.

“I love selling this idea to parents and kids, given that I’m in the exact same target group right now,” Kashalkar says. “At the end of the day, it’s just a great feeling that I’m doing something good for the Earth and families.”

Shriyans Bhandari, MSEL’16

As part of our business model, we want to donate shoes to the millions of people around the world who can’t afford them.—Shriyans Bhandari, MSEL’16, Greensole

Worn-Out Kicks

As an undergraduate business student in Mumbai, India, Shriyans Bhandari, MSEL’16, was a devoted runner, logging hundreds of miles at a park near his college. He befriended Ramesh Dhami, an athlete and runner, and the two lamented about burning through three to four pairs of pricey running shoes each year.

The friends began to wonder: Could they squeeze a little more life out of their sneakers? The shoes usually tore at the sides, leaving the soles largely intact. Perhaps they could use the soles to make sandals for themselves? The duo “sat down and experimented,” Bhandari recalls, using a utility knife to cut the sole away from the rest of the shoe. They applied an insole using glue and repurposed a discarded bicycle tire to make straps. In the end, the sandals looked fun and felt comfortable.

This idea has potential, thought Bhandari. His research revealed that 350 million pairs of athletic shoes are thrown away each year around the world, and athletic shoe manufacturers junk as many as a half-billion pairs annually due to manufacturing defects. Bhandari and Dhami reasoned that turning discarded shoes into wearable footwear could not only be profitable but also reduce the burden on landfills, an Earth-friendly benefit that appealed to Bhandari, a wildlife advocate and photographer. As part of their business model, the socially conscious duo also wanted to donate some of the shoes to the millions of people around the world who can’t afford them. Walking barefoot is risky for people in certain developing countries, where potentially life-threatening diseases are spread through soil. Bhandari and Dhami especially wanted to get their sandals to kids who don’t own shoes for the walk to school.

They named their venture Greensole and entered a business competition through the Entrepreneurship Development Institute of India in April 2014. The idea was well-received, and they won funding, which helped launch the business.

An Education in Shoes

The two friends had big dreams for Greensole, but they faced one giant hurdle: Neither knew how to manufacture shoes. So they set to work educating themselves. “We went to an area in Mumbai where the footwear industry is concentrated to learn about basic manufacturing,” Bhandari says.

Then attending classes at a footwear design and development institute in Kolkata, India, they found themselves trying to convince industry veterans that their idea had merit. “No one had ever thought of converting old shoes into new footwear,” he says. “I think we got the idea because we are outside the footwear industry and weren’t limited by technical knowledge.”

The duo’s manufacturing technique has come a long way since their experiment with the utility knife. Greensole now heats the old shoes to separate the sole from the upper, washes and dyes the sole, and then attaches sandal straps, which are made from discarded uppers or other materials rejected by shoe makers. The look of the sandals varies depending on the available materials, “but they are always of good quality and comfortable,” Bhandari says.

To facilitate collections, Greensole has placed large boxes around Mumbai where people can discard unwanted shoes, including sneakers. They also convinced three local companies to run shoe drives among their employees, who brought in old shoes, while the companies donated the equivalent of $2.50 per pair to help with refurbishing costs. The companies liked Greensole’s social and environmental mission, says Bhandari.

Since its first business competition win, the company has won two more business prizes. With this funding and donations from corporate partners, Greensole has made 3,000 refurbished sandals and donated all of them to people in the Maharashtra region of India. The immediate goal is to scale up operations and begin selling sandals this spring for $15 a pair, both online in India and in Indian handicraft stores, such as Fabindia. The company currently employs 11 people and relies on 24 volunteers to help with tasks such as distributing refurbished shoes. Scaling up will mean hiring hundreds of skilled workers. Shoe manufacturing is a hands-on process, unlike other, more automated types of manufacturing, Bhandari explains. “Even the most advanced footwear manufacturing units have a huge manual labor component,” he says.

About 80 percent of revenue will come from sandal sales, says Bhandari, and the other 20 percent will come from corporate partners. Greensole aims to donate 20,000 pairs of sandals by the end of 2016 and, eventually, expand sales to customers around the world.

While some companies that make recycled sandals from old tires already exist, Bhandari believes that Greensole has no direct competition right now. He sees their customers as “people who want to buy cool, comfortable products with a story and environmental impact.”

Bhandari and Dhami are motivated not only to make the company profitable, but also to make a difference. “It makes me happy to think of small children walking to school in our footwear,” he says.

Erin O’Donnell is a freelance writer in Milwaukee.