Spotting the best deals and bargaining, be it at roadside shops or in swanky malls, are a penchant most Indians are born with. With an increase in the number of group buying websites, discounted fashion brand retailers and specialised online stores, this fetish has now shifted to the cyberspace, too.
The growing popularity of these sites is evident from a recent survey by Dataquest, which found group buying sites, discounted fashion brand retailers and online stores dominated the list of the 20 hottest e-commerce start-ups.
Says SnapDeal Co-founder Kunal Bahl: “People are warming up to the idea of buying stuff and deals from the comfort and convenience of their houses. Moreover, they get deals they otherwise don’t have access to.”
SnapDeal, a group buying site founded by Jasper Infotech in 2010, sells everything from beauty to holiday packages. It attracts half a million visitors every day. It has tie-ups with 50,000 merchants across 30 cities in India, and has extended services to five overseas locations.
“The site not only gives me best deals but also offers bonus discount if I invite my friends to become members,” says Dipti Singhal, a chartered accountant.
Explaining how the group buying model works, Ashish Bhatnagar, co-founder of mydala, says his website approaches merchants like small restaurants, spas and beauty salons, who offer it deals. For example, a restaurant may offer dinner for two at Rs 500, which would have otherwise cost Rs 1,000. The website then guarantees a minimum number of customers to the restaurant. Once the customers buy the discount coupon, the website gets Rs 100 (of the Rs 500) as marketing fees.
“This model works very well with small merchants. They can reach their target audience without spending a lot of money on advertisements.”
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“It helps us save money on advertisement. We offer the best price and the rest is taken care of by the websites. Moreover, it helps us get more customers,” says a beauty salon that has a tie-up with Deals and You, a group buying portal. The portal provides discounts on services and products, and has a reach of over 1.5 million members.
Private sales sites are also catching up with group buying sites. The young with high disposable income aspire to get brands like Davidoff, Gucci, and Prada, even when they don’t have the means to get such big- ticket products. However, private sales sites like Fashion and You offer the same products at discounted rates.
Though considered a top-10 city phenomenon, it is fast spreading to Tier-II and Tier-III cities. “We get about 40 per cent users from outside the top-10 cities,” Pearl Uppal, CEO of Fashion and You, says.
Fashion and You is already transforming the online business space, with an innovative consumer-driven approach and great bargains on most sought fashion and luxury brands. The 11-month-old site has one million members and gets about 300,000 visitors and 2,500 orders every day.
“While we are seeing Indian e-commerce start-ups replicate the same models that have been successfully developed in markets like the US, they have adapted the models to suit Indian needs,” says Dataquest Editor Shyamanuja Das, who led the team of researchers.
Examples of such adjustments include accepting cash on delivery as a payment method, working with multiple logistics partners to reach out to different parts of India, returning products that do not meet expectations, and so on.
Online social shopping sites are not only attracting the attention of young haggling buyers but also catching the fancy of venture capitalists.
Recently, SnapDeal raised $12 million from venture capital investors — Nexus Venture Partners and IndoUS Venture Partners. In December 2010, Fashion and You raised $8 million from venture capital company Sequoia Capital.
Bhatnagar of mydala says one of the reasons for investors’ interest in these sites is the business model. “The business model is highly scalable and the Indian market is growing and is very big. There is room for many players in the market. And, most important, all the sites have a quick set-up and no inventory.”
The pros are they will go on to become important destinations for consumers, and give consumers great value. The con is that deep discounting could hurt their margins.