Great bargain in group buying

Groupon's success has attracted an array of entrepreneurs and investors to the space of group buying in a great way.
Providing a platform

Undoubtedly, this is contributing to its popularity as a potential social commerce model in the rampant times.Group buying offers phenomenal discounts of upto 80 per cent or more by employing the combined bargaining power of a large group, targeting great discounts from the merchant establishment. The merchant(group) is guaranteed customers as well as a promoter of the deal shopping portal. Once the deal is live, he will be sent a coupon via email, providing him a smart way to indulge in great lifestyle perks and experience incredible savings too.

 

Working for a retailer

Group buying platform is an online channel through which retailers acquire customers and reach out to target audiences within a short span of time. The retailers presenting offers through group buying sites have the opportunity to capture customers that may have otherwise been difficult to reach. “It is a very cost effective model for the retailers, given that it is a completely variable model, i.e. there is no fixed cost upfront. The customer acquisition cost is given out as a discount offer to the websites,” opines Kunal Bahl, CEO, SnapDeal.com.

 

Amitabh Saran, CEO, Buzzintown.com shares the various reasons for retailers to offer heavy discounts. The reasons can vary from – attracting footfalls: to attract pre-paid new customer footfalls – that can be converted to repeat customers (and the lifetime value of a customer is much more than the one time discount they give); new products: retailers often choose to engage customers outside their usual buying patterns – offer discounts on products that they believe are very good but because they are new, customers are not willing to ‘try’ them out; make the scale tip: seating in a restaurant, for instance, is a perishable commodity... not all restaurants, even the very good ones, are not 100% occupied all days of the week, and at all hours when they are open. If discounting can get people to come in during these days/hours – why not benefit?

 

Add-ons

One needs to diverge from the current almost-commoditized model of Group Buying, recognize their area of strength and capitalize on that to capture the market and leverage on the growing e-commerce market in India. Bahl comments, “Group buying sites being in the service space need to get much 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.”

 

In Saran’s opinion, the biggest service (add-on or not) is their customer friendliness! “Where else could you buy something and get a refund is you didn’t like it – all from the comfort of your home? It could include throwing in freebies like credit points (for buying their next deal) or free shipping or a higher discount for introducing friends…,” adds Saran.

 

Next level

The retail industry has witnessed a rapid growth in the recent years. Large numbers of small retailers have entered the market, and hence the space has become very competitive. This has resulted in higher customer acquisition costs, and also a lot of perishable inventory. Retailers are beginning to accept that daily-deals/offers are not just about offering discounts on unsold inventory, but a great marketing tool to win new customers in their favour because they (retailers) do have a differentiated product to offer! Saran shares that they are slowing offering good deals on premium products – and this will go a long way. Bahl says, “On the consumer side, there is an increase in disposable income and people are keen on discovering and enjoying new experiences, around shopping, eating out and recreation. Since the group buying businesses solve both the problems and aims at bringing both the retailers and the consumers together, the model has found wide acceptance.”

 

However Saran avers, “Customers today are buying vouchers for instant redemption (going to the restaurant the next day or weekend) vs. planning ahead knowing that they will frequent the place ‘x’ times during the next 3 months so buying ‘x’ more coupons! Further, their mindset is slowly changing that getting discounts doesn’t mean accepting lower quality products/services. The government advertises that consumers have the right to bargain even on MRP, so why not get deals for entertainment?”

 

In store

Ecommerce has been around for a while in India. The Indian consumer is yet to accept completely, online shopping and spending as a substitute for the in-store shopping. Though, it has been learnt that it’s been largely limited to online travel and most of the categories are still trying to convert offline customers to buy via online platforms. “The other challenge is the reluctance to use credit cards online. While it is normal in the West to shop online using a card, Indians would still prefer to pay it through cash, instead of revealing the personal details or card details over the internet,” avers Bahl. Saran opines, “Deals/offers have been around too – but mostly offline (printed coupons) and we all know how difficult it is to keep track of them when you want them the most. Internet and Mobile will be the game changers here – consumers will definitely look up their browsers or mobile phones before they shell out precious money for their next outing! With the advent of smart phones, the increasing penetration of the internet and the confidence in spending through plastic rather than cash, Entertainment, Organized Retail, Hospitality are slated to grow to $500 bn plus in the coming years, wherein deals/offers will get a fair chunk of this spend!”

 

Given the growth of Internet penetration and the number of credit card holders, the entire e-commerce industry is set to see explosive growth in the future. “Innovative models, and increased relevance to the Indian consumer will work wonders for this space,” sums up Bahl.

 

 

 

 

 

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