You know an idea has arrived when it leads to ‘me-too’ products that turn it into a full-fledged industry. eBay did it with online auctions and Facebook did it with social networking. And now, sites like Snapdeal, Grabbon, Taggle, DealsAndYou are trying to popularise the concept of ‘group buying’ online.
Group buying works like cooperatives, where a large number of people buy from a merchant. The group-buying site, after negotiating directly with merchants, selects and advertises an offer for a day to its subscribers — typically a hotel stay, a restaurant booking, an excursion or a 'spa day' at an attractive, one-off price. The deal is only available for a short time, often just one day.
What’s in it for buyers?
Bangalore-based consumer Rachit Gupta, a registered member on group buying site Koovs.com, says: “With discounts ranging between 50 per cent and 90 per cent at local eateries, spa centres and resorts, I have been able to go out with friends more often without burning a hole in my pocket.”
From paintball battle sessions to dance classes, theme restaurants to spa treatments, treks to tattoo studios — group buying sites are catapulting what have been traditionally offline businesses and services to over 50 million internet users in the country.
"Small and medium entrepreneurs do not have the required cash to spend on publicity. Being part of a group buying deal gives them the exposure and also a customer base with no upfront investment," says John Kuruvilla, CEO and founder, Taggle Internet Ventures. Taggle has been selling discount deals from brands like Jet Airways, VLCC, Bombay Store and Barefoot.
Last month, the website DealsAndYou.com sold 1,043 discount coupons for the New Delhi-based quick service restaurant '34 Chowringhee Lane' in 72 hours flat — a coupon every four minutes! The coupons allowed customers to get 51 per cent off at the restaurant.
Mumbai-based G S Kumar, a registered user of the site, points out: “The fact that deals are mostly based in your city, and include restaurants, hairdressers, beauty parlours and adventure activities, make it a relevant purchase. These are either luxury outlets or services that we would otherwise not be able to access.”
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As seen on TV, too!
Now group buying has moved to TV. Cellcast Interactive has introduced a tele-shopping show called 'Bargain TV', which is aired between 6 pm and 7 pm, on Imagine Showbiz. The format is simple — a new product is put up for sale and the price of the product keeps falling as more and more people buy it. In other words, the discount on the product increases as the number of buyers increase.
“The lowest price is offered to all buyers, irrespective of the price at which they booked it. Buyers can get discounts of up to 75 per cent on various products,” says Pankaj Thakar, CEO, Cellcast Interactive. The products sold on Bargain TV are directly sourced from their respective manufacturers and buyers get multiple payment options.
The number of buyers in this industry would have been far lesser had the discounts been only in the range of 20-30 per cent. "Since our launch in February, we have helped consumers save up to Rs 2 crore. If one single company lets you do that, think of the many deals going on at the same time and the amount a person can save,” claims Kunal Behl, CEO of Jasper Infotech, which owns sites like Grabbon and Snapdeal.
So, what’s in it for sellers?
The group buying sites charge 35-40 per cent of the deal price, which can be anything from Rs 50 to Rs 1,000, depending on the deal. The amount they make is directly linked to how many coupons they can sell. Group buying site Mydala, for example, sold over 700 deals on Amore Gourmet Gelato cakes worth Rs 100. Taggle sold over 40 Surat Diamond deals priced at little more than Rs 1,000.
A particular feature of the group buying concept is the value it offers to local businesses and advertisers. Group-buying operations, typically, expand city by city. This is because deals have to be local. Businesses from spas, restaurants and adventure getaways act as the main source of such offers.
On any given day, these sites sell 2,000-5,000 deals nationally and, with a registered customer base of over 10,000 people on an average, the business is only set to grow. Anisha Singh, CEO, Mydala, which started in December 2009 in Delhi and is now present in nine cities, remarks: “Then again, it is not just about giving a huge discount, but also about providing an experience that brings back the customer.”
Realising that cash-on-delivery remains the preferred payment channel for first-time buyers, sites like DealsAndYou have introduced it as a mode of payment, too.
DealsAndYou Director and Co-founder Guneet Singh insists: “Unlike some of our competition, which just collects commission and then passes the customer to the merchant, we work closely with the merchants. The fact that we are collecting the payment on behalf of the merchant ensures we have the relationship with the merchant where we can ensure service standards are not compromised.”
WHAT’S GROUP BUYING ALL ABOUT?
# All group buying sites let their members know about a deal that is on offer by sending emails or even text messages on their mobile phones (if the number is shared). Hence, you don't have to run to find a deal. It finds you!
# Usually, group buying sites have deals in different parts of a city and try to cover local brands and eateries.
# Social networking has become one of the biggest platforms for communication and group buying sites have taken advantage of this effectively. You can share a deal on social networking platforms and get referral rewards if your friends buy those deals.
Hurried pace of activity
DealsAndYou, a joint venture from Harish Bahl of Smile Interactive and Group Buying Global AG (promoted by Dr Klaus Hommels & Oliver Jung), recently acquired group deals startup WanaMo.com.
Jasper, a multi-channel direct marketing platforms company in India, which also owns group buying site SnapDeal.com, acquired Grabbon, another group buying site operating in Bangalore.
Taggle recently received around $8.75 million in a first-round venture capital (VC) funding from Greylock Partners and Battery Ventures, a firm that has also invested in American group buying site Groupon. Even Koovs is reportedly in the final stages of stitching up its VC funding.
With capital infusion in such sites picking up, swift expansion is definitely on the cards. MyDala plans to go hyper-local in a few months, giving deals for specific areas of any city (like Andheri and South Mumbai in the country's financial capital). Others, like SnapDeal, are focusing more on expanding nationally. SnapDeal plans to add 10 more names to its list of cities in the next few months.
However, Taggle is currently just looking after Bangalore deals. "We want to educate consumers properly in one city before we move out. But that is definitely on the cards,” says Kuruvilla.
Between personalisation and clones, group buying is set to spread and that's easy to predict. What's far harder to predict is what the impact will be on how shoppers perceive fair value in a world saturated by group buying.