Group Buying Ventures are here to stay in India? Entrepreneurs and Investors talk on the current opportunities and challenges in this space

27th Aug 2010
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Group Buying

E-commerce at one level competes with traditional retail (Flipkart as an online book shop has definitely given many book outlets a run for their money) and at the other level drives footfall to the retail stores (all of us read/heard of the Groupon’s role in driving traffic to the GAP outlet in United States) and acts as an Internet marketing channel for retail. Hinging on this overriding role of ecommerce is the new breed of web platforms in India that are coming up in group buying and discount-focussed buying.With so many sites coming up in India and a considerable VC interest in the space, the question that is being raised is, “Are these startups going to survive in the long run, is there a space for so many players, are we just replicating the successes of the west?”

I spoke to a VC and on condition of anonymity, he said, “Lifestyle product and services (restaurants, pubs, etc.) have traditionally made inroads among consumers through good recommendation, editorial coverages or word of mouth.” This need for good lifestyle product/service alongwith a good discount is something which every consumer wants. In a way it's an intrinsic and real need. Today Group Buying sites in India are addressing this need of the market and hence I wouldn’t say it’s a fad but something which is going to stay and shape up the way people buy and consume. Moreover, India has never been big on direct marketing. So the opportunity to explore this avenue of Internet marketing is huge. But yes, what the entrepreneur who is in this space or planning to enter the space needs to realise is, who his/her target audience is and what value they are delivering.”

K Buddha Chandrasekhar, entrepreneur behind the newly launched TheIndiaMarket(www.theindiamarket.com), a platform for location- and time-specific deals, daily essentials using internet, mobile, intranet and offline call centre platforms, said, “We are very clear on who are customer is and what value we will bring to him/her. We have done a detailed study of the urban Indian consumers and The India Market is the result of our findings. Today people are looking at 3 things – convenience of shopping (we are into web, mobile, offline call centres), sizeable discounts and authenticity of information. I believe the space is large for many players but the decisive factor will be the execution and delivery mechanisms."

Anirudh Singh from Canaan Partners exudes confidence about group buying in India. He tells me, “At Canaan we’re fairly bullish on e-commerce and group couponing combines that with the consumer need for bargains. It would also be interesting to see Taggle’s (which has a very good team) approach, which got a $8.75 million funding recently from Battery and Greylock.” Speaking on the present scenario, Anirudh adds, “In India, most Group Buying websites seem to have similar website designs, operating in approximately the same geographies, giving bargains in almost the same kinds of deals and giving approximately the same discounts as well! To sustain a venture differentiation is required. It has almost become a commoditized business. Entrepreneurs need to think of the barriers of entry they need to have for their respective ventures. We have looked at a bunch of group coupon websites in the past few months, all of them seem to be very similar to each other . From what it seems currently, it is just a factor of the branding and marketing each website will  carry out to capture the consumer mindshare. From an investor perspective, this is not the ideal way to create a successful company, in this kind of a space at least.

Quizzing him on what he thinks will be the deciding factor for success of these ventures, Anirudh is of the opinion that “each entrepreneur needs to decide what his/her barrier to entry will be." Copycat models should not proliferate, according to him when he explains, "as I said, most websites currently seem to be similar to each other. Entrepreneurs need to sit down and think what their differentiating factor will be compared to the others – it could be brand positioning, type of deals, consumer audience targeted, types of sectors they are operational in or any other factor. Ultimately, one needs to diverge from the current almost-commoditized model, recognize their area of strength and capitalize on that to capture the market and leverage on the growing e-commerce market in India.”

Ishita Swarup, a serial entrepreneur, who started one of the first BPOs in India and made a successful exit and now is at the helm of 99 Labels feels that this space is still in its early days. She predicts that “While true differentiation will emerge over a period of time and we are in early days yet." Talking about how her company is looking at this space, she adds: "Our focus at 99labels.com is on the following:

Brand Selection: Besides the certain hygiene features such as 'how to measure yourself' and ' zoom', we are very particular about the quality and kind of brands and merchandise we provide to our customers. Some key aspects we keep in mind while planning our brands line up are:

- We ensure the discount deal is the best available at that point of time.

- In any given month we ensure we cater to all segments like men, women, kids, home. We also cover all categories like home, apparel, accessories, travel and more.

- We engage in theme based sales keeping in mind the festivals and big events in the country. For example: we did a rakhi special sale, where we ensured delivery before rakhi and sold designer rakhi's and chocolate gift hampers. All our brands and communication is focused around the same at that point of time. We also keep in mind that we have something to offer across a wide price range.

With respect to Rakhi’s – we had rakhi’s to offer at upto Rs 50 as well as Designer Silver Rakhi’s at upto Rs 900.

Merchandise display: We do strict quality controls on all our merchandise. All our product shoots are done keeping in mind that one, all merchandise looks appealing and accurate to the customer and two, the customer can see enough detailing in the visual to easily arrive at a decision. All our descriptions are extremely detailed with references to the materials used, sizes, occasions it can used on, etc.

Customer care: We have a very flexible 'no questions asked' return policy. We have also gone out of our way to offer customized services for our customers convenience. Our customer care has executives who are trained to help customers in the purchase decision, by helping them with sizing along with providing responses to questions on the purchase process etc. Our customer care is available via phone, e-mail and live chat.

For example, Once, one of our loyal customers wanted to send a gift across and wanted to also send flowers and a cake. The same was to be delivered on a particular date. Our team went out of their way to accommodate the customer's request. A satisfied customer is the biggest compliment we can get and this results in a very high percentage of returning customers/ buyers.

How does she sees the Indian e-commerce in particular Group Buying ventures shaping up in our country? Ishita echoes the same early days nature of this business in India: “While it may be too early to paint a true and clear picture, the trend so far has been more than encouraging. E-commerce is still in its nascent stages and has a long road to traverse; but we are very optimistic about the future. It's true that online discount event sales and group buying is a tried and tested formula abroad and its success in India is all but guaranteed because Indian buyers love discounts.

In particular, group buying as a concept is more focussed on service sector. Group buying sites being in the service space need to get very localized to cater to a large audience. For example, take a big city like Bombay. If you stay in Versova, you would not care for a great deal in South Bombay as it would eat two hours of your travel time. Also you would need to have a large amount of internet users in every area to utilize a group deal well. We on the other hand being in the product sector have been able to cater to all segments/audiences across the country and even internationally for certain merchandise. Also, as we choose and ship the merchandise, we have control over the final product to the consumer. In a group buying format, as you are buying a voucher, the experience is not in control of the venture. It is completely dependent on the service provider.

The model is exciting. It is a low barrier to entry proposition, so there are a lot of players emerging in the group buying space, but how many ride the wave would depend on how deep one has been able to penetrate and go local.”

Consolidation and investment in this space has already started with approximately ten investments till date

Tony Navin, co-founder, Grabbon (which is now a part of Snapdeal) says, “ For us it made a lot of business sense to align with Snapdeal and offer a consolidated and effective platform to consumers rather then compete individually in the same space."

Also this space is creating opportunities for other allied services like social media, user interface application development etc. Group Buying is here to stay and in the process will push the other allied businesses.

Advit, CEO of ODigma (Social media marketing agency) is excited to get many queries from top guys in the field. "We have received several queries from all the top players in the Group Buying space for social media promotion and allied marketing activities. For them, we enable effective reach out and engagement to their target audience online. It's an interesting space for us, as we have to innovate our approach regularly to meet the customised requirements of e commerce ventures," he says with a note of optimism.

We at YourStory.in believe that alot of action will be seen in the coming months, with more investments, more consolidations and Yes! more entrepreneurs entering this space.

Shradha

Look forward to your views. Do write to me at shradha@yourstory.in

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