Websites leverage the power of buying in groups to come up with money-saving offers.
Economy of scale — an oft-used strategy that remained in the realm of those dealing with wholesale numbers. Well, not any more.
Leveraging the power of group buying, websites have come out with deals at the retail level to help the average consumer save up to a whopping 90 per cent. The concept behind these sites is simple: Bring together a group of buyers for a one-day bargain offer in order to decrease the price of a service or product. The best part is the simplicity with which these sites operate. A consumer has to just register on the site. After that, he will receive emails and SMS updates about daily deals. For instance, at a local restaurant. He can then ‘buy’ or ‘book’ these by paying just a token amount. Once a minimum number of people have ‘bought’ it, the deal goes live and the consumer receives a printable coupon from the site. All he has to do now is go to the service provider, show the coupon and pay the remaining amount to enjoy the offer. The token amount is not credited till the deal goes live.
| THE FINE PRINT |
| * Most deals are valid only for a specific time, say 2-3 months |
| * Deals do not go live unless a minimum number of customers ‘buy’ |
| * Different deals cannot be clubbed, and are usually for only one or two customers each |
| * Tours, treks can be cancelled if the weather becomes unsuitable, especially during monsoon. However, in such a situation, a refund is offered |
| * Most of these sites cater only to the metros at present |
| * Payment gateways can create problems — book a deal with some time in hand, so that the customer service can solve any problem well within time |
“It’s a win-win situation,” claims Tony Navin, founder of Grabbon.Com (which was recently acquired by Jasper Infotech, owner of the group buying site SnapDeal.com). “We scout around for good deals for consumers, while ensuring the service providers get a minimum number of customers.” Navin, along with Jackson Fernandes and Balamurugan Balasubramanian, launched Grabbon to harness the collective buying power of the online community in Bangalore in a way that benefits all. The site offers deals on such services as pottery classes, dance workshops and paintball sessions.
Price, of course, remains an important parameter.
“Indian audiences are very price sensitive. And there is still much uncertainty over online banking,” points out Kunal Bahl, CEO, Jasper Infotech. That is precisely the reason why most of these sites keep online transactions to a minimum. Jasper was founded by Bahl and Rahul Bansal. Bahl waited to check how retailers accepted this business model before foraying into it in February. They followed their observations with further market research. Five months later, the SnapDeal page on Facebook already has over 41,000 fans. The transactions done on the website are, again, kept to a minimum. And, to ensure safety, runs on physically-secured servers with highly restricted access to the application code and database.
Prepaid purchases, too
Taggle.Com has gone a step further to make things easier. It lets a customer pre-load a specific amount into his account, similar to the prepaid balance of a cellphone. So, when the customer decides to go in for a deal, only the cost will get debited from his ‘Prepay’ balance. Taggle also offers a one-time two per cent bonus on the amount.
“We have focused on two main offers at any given point of time — at two different price points. Also, with the Indian mobile user base at 500 million — which is ten times the internet user base in the country — we have launched a ‘buy-on-phone’ service to reach a larger audience,” adds John Kuruvilla, CEO and founder, Taggle Internet Ventures.
However, some sites like Mydala keep the payment option completely online to ensure that companies do get clients. Founded by Anisha Singh late last year, the site gives one of the highest discounts in this particular business model. With deals from the likes of Yummy Dogs, Casa Soul Fry, Cafe Liwa, adventure travel provider Zice, as well as spa treatments from Bamboo Tree and Orchid, Mydala brings many ‘not-so-usual’ activities to consumers.
Some hiccups though
However, reading the fine print of each deal is very important. Even then, customers have, at times, faced problems. Sanjiv Dewan, a Delhi-based technical trainer for an MNC, describes his ordeal: “My order for lunch never came, even after the payment’s confirmation. It was not just a humiliating experience, but also a waste of time. However, the site’s CEO himself called up and made sure I got lunch from a different place within a week.”
Most sites, in such a case, agree they would be willing to give a full refund. They’d better. After all, with a new group-buying site launching every other week, customers are spoilt for choice. With this, competition to give better deals at the cheapest price increases.
However, site managers are not scared about their future. Points out Navin: “Barriers to entry are fairly low in this concept. But your success depends on how you execute it and value your user base.” He has used both social and offline media to market Grabbon’s offers, even as word-of-mouth brings in more customers.
Expansion plans are also on the cards. SnapDeal has been able to make its presence felt in eight cities, and plans to expand to seven more within next month. “We have the first-mover advantage in terms of geographic presence. With our reserves, coupled with good-quality deals, we would surely be able to expand into Tier-II and -III cities,” says Bahl.
With expansions and more launches, group buying will be something to look out for. Says Kuruvilla: “Organised retail in India is slated to grow to $41 billion by 2012-2013. Of this, it is estimated that close to 15 per cent will be accounted for by discount stores like Megamart, Brand Factory, Loot and others. There are no numbers for the service industry. But, if a similar trend is applicable, then the potential is immense.”
