Role of discounts/coupons in online retail

Written by: Madhur

On Oct 22nd, 2011

eCommerce market in India is booming right now. Few top reasons why this has been possible are:

  1. Increase in the Internet user base (mobile Internet usage as well as broadband penetration)
  2. Evolution of the ecosystem required for supporting online retailing (third parties providing logistics, payment options, affiliate marketing, coupons)
  3. Flurry of investment in this space. There is some good coverage here.

Each of the above points merit more than one article on their own, but in this post, we cover a small but important piece of the puzzle - third parties providing information on coupons/discounts/promotions.

People shop online for comfort, huge product selection and attractive prices. Online discounts (in the form of coupons/deals/offers) help further sweeten the deal by lowering prices even more and hence driving conversions. There are plenty of sites that provide information on the latest available discounts, some of the notable ones being: couponzguru, desidime, coupondunia. You can get many more by googling for “[retailer name] coupons”. Most of the sites have similar data as well as look and feel. But to their credit, the coupons shown on these sites do work and can result in significant savings for online shoppers in India.

We have been regularly using couponzguru for our own online shopping needs and it has saved as a bunch money in the past few months. We spoke to them recently and got some insights into the coupons business. Here are some highlights:

  1. Business model: They partner with online retailers either directly or via third party affiliate networks and get paid by sending traffic on CPA basis.
  2. Marketing: Search engines are a major source of traffic, so its important for them to follow good SEO practices including good user experience, unique content, inlinks etc. They also get traffic from social media sites like FB, twitter, etc.
  3. Data: They get their coupons/offers data directly from retailers, from promotional emails and user submitted coupons
  4. Quality: They need to make sure that they do not have spam and the coupon code that are displayed actually work.

One interesting tidbit is that Flipkart, which is the poster child of Indian eCommerce story at the moment has moved away from online coupons. They used to have an option for providing coupon code some time back, but they don’t anymore. We wonder if Flipkart actually saw any decrease in conversion because of the presence of coupon code box. One can imagine that during the checkout process when users see a space for coupon code but cannot actually find any coupons, they may abandon the transaction thinking they will buy when a coupon code is available.

In any case, Flipkart does advertise lower prices and sends timely emails highlighting offers/promotions. So one way or the other, as the competition in the online retail space heats up, online retailers will continue to provide lower and lower prices, which is good for online shoppers.

What is your take on the role of coupons/discounts in online shopping? How do you find online coupons/promotions? Any interesting experiences to share?

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Group Buying: Not meant for the Indian market?

Written by: Samir

On May 25th, 2011

With a plethora of group buying websites flooding the Indian markets, E-commerce is certainly on the rise. According to the Internet and Mobile Association of India the market grew 70% from Rs. 19,688 crores in 2009 to Rs. 31,598 crores in 2010 and is expected to grow another 47% to Rs. 46,520 crores by the end of 2011. Over 25 group buying websites are already present (most of them emerging during the past one year) making the market quite cluttered, differentiation is missing between these sites and margins are razor thin.

Snapdeal, Deals and You, Buy the price, sosasta, khojguru, taggle, koovs, among others, are the new drivers of E-commerce in India. Most of these sites are relatively young, but investors are not shy of investing in them. January saw the world’s biggest group buying site, Groupon enter Indian market with the acquisition of Kolkata based sosasta.com. Infoedge (of naukri.com fame) invested Rs. 9 crores in mydala.com and German Group Buying Global AG acquired Mumbai based WanaMo.com and rechristened it as dealsandyou.com. What is also interesting to note is the entry of several major online giants in this space. Prominent e-Commerce player eBay.in entered this space. The last month witnessed two major online shopping sites: rediff.com and Times Internet launch their deal sites, Deal Ho Jaye and Timesdeal.com respectively.

Group buying websites come up with deals offered by different merchants in the city. These deals are active for a couple of days and discounts range from 20% to an incredible 95%. The user is either asked to pay the entire amount of the deal or an advance. However, there have to be a minimum number of people who opt for the deal before it become active. If the number of people who opt for a particular deal is less than the minimum required the deal is scrapped and the users get their money back. The deals are for restaurants, gyms, spas, health clubs, travel and various other services. The websites get a cut in every successful deal. These websites use Facebook and other portals, twitter or bulk emails to reach out to the potential buyers. They also thrive on word-of-mouth promotions.

But wait. Is the picture as good as it appears on the surface? Let us analyze different challenges for this business.

A highly cluttered market: With over 25 websites already present and many more in the pipeline, the competition in this market is cut-throat. The fact that these websites can easily be set-up, as the barriers to entry are very low, will only increase the competition further. Readymade softwares are already flooding the market and web development firms take no time to get you a Groupon type website up and running.

The key here is differentiation. Most of the websites present in this space are exact functional clones of each other (with some using the exact same templates as well). It is refreshing to see sites like Buytheprice.com who have tried to differentiate with a new incremental discount model, where they have deal slabs and discounts vary based on the final number of people who opt for the deal.

Deals: Are these deals too good to be true? I tried picking up a couple of deals at random from these websites. I picked up a deal for Hotel Ramada Gurgaon Central from snapdeal.com. Snapdeal claimed that the price of a night’s stay in this hotel was worth Rs. 12100 but they are offering a discount of 59% which means there price is Rs. 4999. I did a very basic online research and these are the lowest prices across various websites:

Hotel Website       SnapDeal       Yatra            TravelGuru            Cleartrip

Rs. 5849               Rs. 4999        Rs. 6928        Rs. 5099              Rs. 4887

Another deal at dealsandyou.com offers Seagate 500 GB and 1 TB Hard disks at Rs. 2999 and Rs. 5499, respectively. Out of curiosity I called up a local dealer in Indore and enquired about the prices. He got back to me with the hard disks priced at Rs. 2700 for the 500GB hard disk and Rs. 5250 for the 1TB Hard disk. These were prices for single purchase and not for bulk purchases.

Please note, these were just random samples picked up from all the available deals and are not indicative of all the deals available on these sites. The point that I am trying to make here is that there still is room for improvement and the deals that are being offered might not to the absolute best. We will surely have better deals as these websites mature.

Impact on local dealers: So does going to these deal sites really help the local businesses? Initially most of these local businesses see the exposure they get through the website. It’s a very good marketing platform for these sites. Or is it? Let us consider another example here. Dealsandyou.com lists an offer for certain salon services at Vibes in Bangalore. On contacting some of the good local beauty salons I found out the normal cost for these services would be anywhere between Rs. 2000 and Rs. 3000. Dealsandyou.com is offering the same at Rs. 750, which turns out to be a very good deal, assuming Vibes provides quality service. But the problem here for Vibes is as follows:

  • They are being pressed for margins and are providing these deals at prices which might not be profitable for them. Going forward as these deal sites mature they will press these local vendors further reducing their margins to a bare minimum.
  • Is this offer serving as a good advertising opportunity for them? I won’t think so. Someone opting for this offer at this salon might be very impressed with the services. But they will be under the impression that this service would cost them Rs. 7500 if the offer isn’t present, which, I would believe, might act as a deterrent for repeat visit.

Technical Challenges: Most of the websites operating in the virtual space agrees that doing business in India comes with its own challenges. Indian regulations don’t allow the storage of credit card information on the payment gateways unlike the US. 30% of transactions fail at the payment gateways. Companies are working on developing their own prepaid cards to ease the process of making purchases.

Traffic: With the exception of snapdeal, all the sites have struggled to generate substantial traffic for their websites. According to Vizisense.com, the total number of clicks for snapdeal was close to 34.4 million with an India rank at 16 (most visited websites in the last month). The second most visited group buying, dealsandyou.com website didn’t even feature in the top 100 and had less than 10 million overall page views, followed by sosasta.com which was ranked at 282 and barely has 3 million hits.

The good thing is, the e-commerce industry is growing rapidly and is also reflecting in the growth in traffic to these websites as well.

Survival: The abnormal increase in the number of group buying websites is posing serious challenges for every player in the industry. The number of group buying websites is already very high and I don’t think all of these sites would survive in the long run. The space would soon see some consolidation with 3-5 players controlling the chunk of the market.

The future of this industry will be quite interesting to follow. The major players will have to innovate to scale-up. Differentiation will be a key driver in this industry. Mobile phones will emerge as an important tool for differentiation as it would help the websites reach out to a wider audience. Companies would also be exploring alternate revenue sources. Another alternative for these companies on the long run would be the huge database of customers they will be handling as well as their relations with the local service establishments they will be serving.

We would love to hear your perspetcive/insights on this business. Please drop a comment or email me at samir@ileher.com.

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Crederity – Trust matters.

Written by: Vivek Garg

On Mar 2nd, 2009

I recently got a chance to talk to  Rakesh Antala. Co-founder and CEO of Crederity. Most  recently, he was Partner & COO of Intivia, a healthcare services startup serving organizations crederity_logo[1]across the United States. In 2004 he started looking for a totally innovative idea with a business plan that he wanted to run through a formal VC process. This is how Crederity was found. Crederity was incubated in the Wharton School of Business, and was also a Wharton Business Plan Competition semi-finalist in 2004-2005. Now it is looking to grow in India. Rakesh is being advised by MVP to take this to the next level. We talked about MVP earlier here.

The name captures what they do nicely. I think it stands for credentials + identity. They are in the business of verifying your credentials and thus identity from the source. When you think of identity, things like single sign-on or digital certification comes to mind. Crederity provides similar services for credentials. Individuals could obtain a Crederity certificate that they can use to differentiate and build trust. On the flip side businesses could avail their services for reference or background checks. So the goal is identity/credential verification and fraud/inconsistency detection.

Say you want to verify someone’s degree from a university. The best way to do so would be to get the information from the university or the school. How about an address? Best way to verify that would be to contact local utility companies or ask your neighbors. But they cannot say how good you sing or dance. Rakesh puts it “you cannot verify something that no one can verify”.

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Whet your appetite with Foodiebay.com

Written by: Vivek Garg

On Dec 14th, 2008

foodiebayIf you are in Delhi area and you haven’t heard already about Foodiebay.com, it is a great  place to find, research and review your food choices before you head out to get some grub. Recently we had an opportunity to talk to Deepinder Goyal. Deepinder is one of the founding members of the startup out of IIT Delhi.

Generally I found the site quite pleasing and all the basics are covered. Deepinder says that their biggest USP is the menu for EACH restaurant listed on the site. And I tend to agree. It is really nice to have a glance at the original menu card. Out of the other players in this space, most notable is hungryzone.com, if we discount “everything local” plays like burrp and other community driven local search sites. Foodiebay definitely wants to go where hungryzone is today in terms of features. Hungryzone seems to have larger presence with lot of  features likefoodiebay_alexa ordering food or make a reservation, done using Zook. What makes foodiebay so interesting is the amount of traffic it is generating as per Alexa in such a short amount of time. Take a look at the following graph. It seems like these guys have caught up to hungryzone already and looking good. I have put burrp & yepme in there to compare the niche play against broader ones. 

Generating buzz and staying on people’s mind is everything for sites like Foodiebay. So how do they do it? Deepinder tells us about one such example. our recent joint campaign with Pankhudi Foundation (an NGO which works with underprivileged children to lift them out of poverty) where we donated Rs 3 to Pankhudi for each new visitor to FoodieBay. This campaign prompted a lot of our existing customers to refer their friends to FoodieBay thus bringing us new eyeballs and loads of funds to Pankhudi.

I bet junta@foodiebay is working hard on their backlog, but some of the features I would love to see personally are

- mobile integration.

- Reverse IP lookup so that users destination is identified in advance.

- Phone integration so that people can call directly via the site. And it connects the users cell phone with the restaurant for ordering or reservations.

- lot of real or users pictures of the restaurant.

- And a buzzing community of reviewers.

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QnA with Morpheus Venture Partners

Written by: Madhur

On Nov 3rd, 2008

Morpheus Venture Partners aims to provide mentorship and advice to early stage startups. We recently got a chance to speak with the founders Sameer Guglani and Nandini Hirianniah. Here is the transcript:

How are you different from a typical seed/angel investor?

MVP is a currently only a Business Advisory Firm. We have plans of raising a fund to invest in the companies we involve ourselves with. However, the amount that we will invest is going to be a small component of what MVP has to offer. We will invest 5-10L where as, Seed and Angels look at deals in the range of 50L to 1Cr.
MVP works with companies one step before seed/angel stage, most of our companies will go on to raise their angel/seed round during their engagement with MVP.
We work with companies in very early stage/ idea stage where as angels/seed investors look for some level of maturity in the business in terms of product, customers, revenues, business model etc. We primarily back promising teams with interesting ideas.
MVP also has a strong community that’s getting created as part of MVP is invaluable for young entrepreneurs. Currently we have 11 companies and 35 odd founders/entrepreneurs as part of this community, who share their learning’s, relevant contacts and much more, which forms a support system for each of the MVP companies.

What do you look for in a startup that’s right for mentorship by Morphius?
* A rockstar team, with the right set of skills, a great vision and a lot of passion.
* Are they solving a real problem and will customers pay them for their solution
* Business targeting a large market opportunity which is growing at a rapid pace.
* Scalable business model
* The comfort level between the MVP team and the founders.
* The amount of value MVP can add to the business has to be significant.

Are there any areas of businesses that you specialize in? (example: internet, enterprise, etc.)

MVP is a sector agnostic business advisory firm open to all kind of startups, at the same time we may not the best choice for all startups. Some of the primary selection criteria are:
* The startup has a rockstar team, with the right set of skills, a great vision and a lot of passion.
* Startup is targeting a large market opportunity which is growing at a rapid pace.
* Can the MVP add significant value to the startup to justify the engagement
* Most importantly, there is a lot of comfort level between the MVP team and the founders.
* Currently we have 11 companies in the portfolio some which are B2B, some are B2C and some are both. Around 40% of our companies are creating products for global markets and the rest are only focusing on Indian market.

Current portfolio spans following sectors:
News, Micro finance / finance, Wellness / Preventive Health, Online Content sharing, HR/hiring, Saas / Online collaboration, VOIP, Local search, Food, Web Services
MVP has also built a panel of Subject Matter Experts with varied expertise and experiences, who are available to work with MVP companies either on a one-off basis or for a longer advisory role, with specific timelines/deliverables built in. These are people who are experts from different fields, entrepreneurs, investors, etc. They come with in depth knowledge of their field of expertise and make available 3-4 hrs every month for the MVP companies.

Do you mind sharing the names of a few companies that you are currently working with?

Following are some of the names from our portfolio companies:
Instablogs (www.instablogs.com )
Commonfloor (www.commonfloor.com)
Foodathome (www.foodathome.in )
moblf (www.moblf.com)
Call Graph (www.callgraph.in)
Crederity (www.crederity.com)
Deskaway (www.deskaway.com)
Dhanax (www.dhanax.com)
Fachak (www.fachak.com)
LifeMojo (www.lifemojo.com)
SutraHR (www.sutrahr.com / www.sutrajobs.com)

6% equity for zero money and 6 months of formal guidance, isn’t that steep?

As a response to this question, I’d like to quote Paul Graham’s views about the quantum of the equity. Although we are not investing any money at this point in time like Ycombinator, but the same reasoning applies in our case too. Below is a link to the interview in reference and I have pasted the relevant section of the interview down here:
http://paulgraham.com/frinterview.html

Question asked to PG: I read that when you call Y Combinator winners, the founders have only five minutes to accept. (”If people turn us down,” he says, “as far as we’re concerned they’ve failed an IQ test.”) Have startups turned you down? Are there any that have turned Y Combinator down and still gone on to succeed with a liquidity event?

Relevant part of PG’s response: The “IQ test” quote refers not to how fast they have to decide, but the amount of equity we usually ask for. In the median case it’s 6%. If we take 6%, we have to improve a startup’s outcome by 6.4% for them to end up net ahead. That’s a ridiculously low bar. So the IQ test is whether they grasp that.

How do you measure the progress of startups working with you? What metrics do you use?
Since every startup is different from each other, we track each one of them separately with different set of metrics/KPIS. At the same time we use common frameworks to ensure scalability. MVP has created an agile start-up framework, which includes
* Weekly meetings, Monthly meetings
* Daily 10 minute calls
* Business goals documents (monthly/quarterly)
* KPIs
We work with each startup to create a set of KPIs (Key performance Indicators) which make sense for their business and these are tracked on weekly and monthly meetings both by us and the founders.
Here are some of the important metrics that are tracked across our portfolio:
* Unique visitors
* Time spent on the website
* VAC (Visitor acquisition Cost) – applies to online visitors
* LAC (Lead acquisition Cost) – applies to offline leads
* TAC (trial customer acquisition Cost) - only applies to SAAS type services where one acquired trial customers and later coverts into paid ones
* CAC (customer acquisition cost)
* ARPU (Average Revenue per user)
* Customer lifetime
* Customer lifetime growth rate
* Monthly expenses
* Monthly revenues
* Monthly Cash flow
* Cash in Bank
* How many months of cash is available
* Product Activity (different for different startups)

The progress is measured based on two criteria:
* Comparing planned Business goals and the achievement done
* Tracking the movement of KPIs again against what was planned as part of business goals

Most of our portfolio companies use the online project management solution from Deskaway (also MVP company) to manage their projects and collaboration. Google docs is also used heavily for document sharing and collaboration on the documents. Callgraph (another of MVP companies) is used to record and share daily/weekly and scheduled discussions that happen over skype.

How is the current market affecting startups in India? Do you see it as an opportunity or death of startups due to lack of funding?
It’s an absolute opportunity for startups and situations like this always separate wheat from the chaff. There will be a set of “Not so good” startups that may panic and succumb to an early death. At the same time the good startups with good teams will figure ways to stick it out, last thru the current market scenario and come out STRONGER on the other side.
Below are some of the measures startups should implement:
* Closely re-examine all costs and eliminate costs which are not needed or which are optional. Also squeeze costs in necessary areas as well.
* Think harder before making any significant cash investment/commitment
* Increase priority of revenue generation activities and initiatives
* Get to positive cash flow scenario asap
* Come up with a product / service which can allow the startup to take advantage of the current market conditions. A good product which can allow people to save money, which is what most customers/enterprises will look to do, will have an good potential to succeed.

Since startups will have hard time to get money, do you think your business will get affected due to current market conditions?
We don’t think startups will stop happening, India is seeing a good momentum of quality startups and we expect the same to continue. This is one of the best times to work with early stage startups as the valuations are favorable and the weaker startups are automatically disappearing, leaving behind quality startups.
Also, the VCs are saying they intend to continue doing deals but they will look harder and deeper and hence take more time on each deal. So the startups today need to make more progress than before in order to secure funding and will need to make the same money last longer, reach cash flow positive and figure out ways to do stuff without spending money. This presents MVP with a good market opportunity.

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Do you have a story to tell about your business?

Written by: Madhur

On Sep 23rd, 2008

Here is a great opportunity to tell your story of the challenges you faced and how you tackled them while doing business in an underserved market. I am sure there are a lot of entrepreneurs in India who might have a story or two that they can tell.

Call for entries open right now. 500-1000 word essay. Deadline - October 5th, 2008. Here’s the link for more details:
2nd Annual Base of the Pyramid Narrative Competition - 2008

According to the site, in summary:
“The Center for Sustainable Global Enterprise at Cornell University’s Johnson Graduate School of Management is accepting submissions for its 2008 Base of the Pyramid (BoP) Narrative Competition. This short-essay competition seeks to highlight the challenges of implementing business in underserved markets and identify innovative business initiatives or solutions to those challenges.”

Is anyone interested? We can work on this together.

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How Indian companies can build their brand during recession 2.0?

Written by: Vivek Garg

On Sep 14th, 2008

With US economy taking a big hit with subprime mortgage and credit crunch, concerns of oil and election not helping either, everyone in India is talking about what does US recession mean for them. A very timely piece from our guest contributor Ranjith Pavithran. Ranjith is founder of the web consulting firm Kapston. Read on ..
—–

According to a majority of economists, the US economy has already fallen into a recession.

When recession grips US, it naturally worries all the businesses depending mainly on US consumers and economy. The recession 1.0 or the dot-com bubble did not really impact most of the “global” Indian companies, as they were either non-existent then or was in their early stages with no dependence on US. This may be the first time a majority of Indian companies are facing such a situation, head-on. Are they prepared for recession 2.0?

Opportunity or threat

It’s tougher to take the customer through the sales funnel from awareness to a buying decision during a recession. So when there is a slowdown, the top-line and bottom-line are both pressured. As normal operations cannot suffer and it is easier to cut advertisements than people, the ad budget takes the first and major jolt. Traditionally and unfortunately, the weaker and short sighted companies start the downward spiral during and after recessions. On the other hand, a quick look at the popular brands today reveals that they all got stronger during one or two recession periods.

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TringMe.com - convergence calling?

Written by: Abhinav

On Mar 30th, 2008

We spoke to Yusuf Motiwala from TringMe.com recently. The conversation covered various aspects including the technology involved, the revenue model, funding and staffing.

iLeher: How did TringMe come about?
Yusuf: We were looking to build a Voice 2.0 platform. This was the TringSwitch that we were planning to push to enterprises so that they could support all types of voice terminations - SIP, Mobiles, VoIP, IM (Jabber), etc. When we built this, we came up with TringMe as a way to demonstrate this platform that we had built and thats how TringMe came about. Then we got covered by TechCrunch and the site took off

iLeher: So how many users do you have now?
Yusuf: 60,000+ plus.

iLeher: Cool!
Yusuf: Yes, we are already generating revenues as well. A lot of these users pay to use the site.

iLeher: That brings us to our next question. Whats the revenue model that you are envisioning? Mostly the Skype-like Call In/Out kind of model?
Yusuf: Not at all. Like I already mentioned, we built a platform that we could sell to enterprises. That remains a revenue model we are going after.

iLeher: So you basically install the boxes in enterprise networks?
Yusuf: Not necessarily. We are also looking at Hosted Services where the enterprise need not spend extra on installing the box. We can take care of the back-end for them. In addition to this, we are looking at licensing our technology to different websites where a real-time interaction between different parties makes sense.

iLeher: Such as?
Yusuf: Dating, travel, reservations (for hotels, travel, etc). There are lots of areas one can think of.

iLeher: Alright. Any other revenue model?
Yusuf: Yes, we are also looking at partnering with developers who have ideas and are looking to build on top of this platform. We will provide them with SDKs which they can use to build their apps.

iLeher: So do you charge them for it?
Yusuf: Depends on the company. We could do a cash deal or take equity. Depends. We absolutely reserve the right to partner in these cases. We will evaluate the company and only then partner with them. Having said that, if we believe in the company, we will see how we can work with them.

iLeher: So what is next on the horizon as far as TringMe is concerned?
Yusuf: We have just announced a mobile solution for low cost handsets. You can check out the announcement on the blog. Our blog has a lot of information about our various offerings- what all we support, etc.

iLeher: Yes, coming to that. You support a lot of terminations. What is your team size and how long did you take?
Yusuf: We are about 9 people

iLeher: Thats all?
Yusuf: Yes, we started around May-June last year. I started the company and then slowly the team grew to its current size

iLeher: Thats a lot of work for this short a time and this small a team!
Yusuf: Well, we have a lot of experience in this field and we were able to apply it to get things working.

iLeher: How about money?
Yusuf: We are self-financed at the moment. Friends and family besides our own money.

iLeher: So are you planning to bootstrap your way to an IPO?
Yusuf: We will go in for a round of VC funding at some stage. We will let you know as and when that happens. ;)

iLeher: Thanks a lot for talking to us
Yusuf: My pleasure!

We spoke to a Yusuf about a few other things which are already covered on the TringMe blog. Please hop over after leaving your comments here.

We wish TringMe all the very best for the future.

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