The other day a friend got home a pair of flip-flops that had ‘Facebook’ branding on it. Curiously, I asked her if it was a gift or souvenir from somebody at that internet company. I was surprised when she said she bought it off a stall on Linking Road in Mumbai.
The internet has arrived in India!
For generations, the quintessential road-side stalls have served as the heart of the ‘great Indian retail story’, reaching out to millions every day. These stalls sell everything, from yummy Italian pasta to Rs 150 jeans that last forever. As much as one would love to avoid them, the owners and suppliers at these stalls are thought leaders on branding and marketing. So no-sooner than a word, personality or brand name becomes popular, these stalls begin to sell every possible item with such brand name imprinted on them. No wonder, they were the first to introduce Aishwarya lingerie, or Dhoni hair bands or Colgate jackets. You get the drift?
| WIN-WIN SITUATION |
| * Daily-deal websites negotiate good discounts (deals) with small and local businesses |
| * These discounted deals are only offered to the website’s subscribers and members. Deals are also promoted through emails, SMS and social media |
| * Consumers buy the deal online and redeem it for service at the merchant’s store |
| * A win-win situation for everyone. Consumers get great deals, merchant gets free promotion and publicity. Deal website gets a commission per deal |
The Facebook flip-flops I saw, bought at a stall, was a mark of approval by mainstream India that we’ve adopted the internet. While good for the consumers, the advent of e-commerce that goes hand-in-hand with the internet is not always good news for all. Let’s examine.
Currently, we witness that with the increasing internet usage, more people prefer to shop online than in traditional stores, which is not necessarily good news for the local and small businesses. Arguments have been floated on how such electronic commerce brings perfect competition for sellers. The truth is, small and local businesses cannot always compete on prices. Similarly, there is a stark difference between a small business and a Fortune 500 company. Most small businesses do not have a large-scale buying power besides having a higher per unit cost of sales.
In other words, it’s easier said than done. It’s tough for small and local businesses to set up e-commerce websites, learn search engine optimisation, social media marketing and at the same time sell products and services. Internet technology, website design, internet marketing are specialised areas beyond the scope of most small businesses.
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| HOW DAILY-DEAL WEBSITES HELP LOCAL BUSINESSES |
| * Groupon: Founded in Chicago, USA in 2008. Enabled thousands of small businesses across the world in reaching out to more customers. Listed on NASDAQ. Market cap: $17 billion |
| * LivingSocial.com: Launched the daily-deal business in 2009. Present in 25 countries. Partially owned by Amazon.com |
| * India too has its own share of daily-deal websites such as mydala.com, dealface.com, snapdeal.com |
Daily-deal websites provide specialised end-to-end e-commerce service for small and medium business by offering guaranteed customers in the store. Most daily-deal websites promote one or two businesses every day, by offering an attractive, genuine discounted deal, which can be redeemed at the local store. While still in a nascent form, the emerging pattern in our country clearly shows that most deal websites are causing back-to-roots phenomenon. Here is how:
- Driving online consumers to the offline store: Daily-deal websites issue voucher codes for products or services, which are, in most cases, redeemable at a local store;
- Transaction-based revenue: The last big significant shift in advertising appeared when Google launched its pay per click (PPC) model. Daily-deal websites charge the merchant on per-transaction basis — a clear departure from non-trackable print advertising or traditional PPC/CPM (cost-per-thousand-impressions) advertising.
- Real win for consumers: Daily-deal websites negotiate a significant discounted price on popular products or services to drive footfalls for the merchant. The rest of the services is at regular rates — the golden model of retailing — that over generations have kept inflation low and services affordable.
So, while India welcomes large e-commerce players and encourages innovative businesses with a positive entrepreneurial spirit, we must remember that we are a ‘nation of shopkeepers’. Daily-deal websites present a great opportunity for these ‘shopkeepers’ to harness the power of internet without breaking their backbone by way of reverse e-commerce.
The author is CEO, mouthshut.com