Deal-a-day sites are all over the place. But one name that resonates across the globe in this segment is Groupon. We spoke with Ankur Warikoo, CEO Crazeal (India unit of Groupon) on the whole deal-a-day site fever that is gripping India.
How do you manage to get deals from original manufacturers / servicer providers keeping in mind your profits?
Groupon is a marketing platform that allows merchants to access new customers or activate lapsed customers. All our merchants are used to traditional forms of marketing such as radio, print, outdoor, direct marketing. In all such cases, a cost is borne not knowing how much of it is going to come back.
At Groupon, merchants get access to millions of customers in a single day, AT NO COST. The cost is only borne per transaction – by which time the merchant has a guaranteed customer.
Because of the cost and reach impact of the Groupon marketing power, merchants work with us. For them, it’s a marketing investment they would have made otherwise too.
Who approaches whom? As in, do the service providers approach you or vice versa?
As expected, early on in our existence, our team approached merchants on a daily basis and pitched the Groupon Marketing platform. Over the past 10 months as we have grown, we now have a sizeable inflow of merchant requests, averaging 35-40 per day. However, the team still meets all merchants physically and understands their business before proposing a deal structure that will be beneficial to all parties involved.
Do you have a say in deciding the discounts, based on the propensity of your users to purchase the deal (based on past user history)?
Considering our global reach and the past 11 months in India – there is massive intellectual property around how deals should be structured. This helps us in proposing options to merchants when we meet them. At all times, we are aware of 3 key objectives:
- The deal should help solve a business problem for the merchant. It could be getting new customer, filling in unsold capacity, pushing new products etc
- The pricing has to be attractive for the customer while not being detrimental to the business
- Capacity planning has to be robust, to ensure we don’t oversell.
Once the above are taken care of, the discount and deal structure is driven by a mutual discussion, with our global and local knowledge used as an input.
Could you tell us about the back-end operations of the deals that one sees on the website? How and when does the payment reach the actual service providers?
Every merchant that runs a deal with us is assigned a dedicated Partner Service Manager. And a unique login to track the performance of the deal. At all times, the PSM works closely with the merchant to solve issues, help with payments, with customer queries etc. The payments start from the day the deal goes live, based on customer redemptions.
From what platforms are most of the deals activated? Desktop / laptop, cellphones or tablets?
Laptops and Desktops account for 90% of all transactions. Mobile has been growing and now accounts for 5% of all transactions.
Have you ever floated deals, where you have to take a cut in your profits?
We usually don’t do such deal. In the cases that it has happened, there has been a sort of barter, where our merchant has also promoted us a brand, while we have done the same.
When it comes to group buying, do users have to pay before they get the service or after? In case they have to pay after, and they default on their payment then what course of action is taken?
We work on a full priced model which encourages consumers to pay the full amount during the time of purchase. Not only does this model eliminates defaulters but also help us reach out to loyal consumers and not mere deal chasers. Our merchant retention rate is indicative of the trust they have in our partnership to help build their business.
On the contrary, if a user has paid for a deal, say discount on a full body massage and if he or she is not happy with the service or is not given the complete service (say he/she just gets a foot-massage and not a full body massage) how then does the customer go about reclaiming their money or a percentage of it?
Groupon has seen tremendous success internationally because of its values. We strongly follow 10 commandments; one of which is to bring/suggest those deals which you yourself would buy. We do a stringent quality check where we experience the deal ourselves before offering the same to our consumers. As a matter of fact we often do ghost shopping just to evaluate the entire experience with the merchant.
Being in the online space, customer loyalty service is fundamental to our business which will derive only through quality and services. We reply to each and every consumer complaint and respond within 24 hours, without exception. If the customer does not get a good experience on the deal purchased, we have a ‘No questions ask” 100% return policy.
With so many deal-a-day websites in the Indian market, how does Crazeal manage to differentiate itself from the rest? Why will I come to your website as opposed to the many others out there?
Because of the deal quality – there is no other science to this business. Groupon globally works with the best merchants and offers the best deal structures to our customers, while solving business problems for the merchants.
We run our business by strong principles that we call the ‘ten commandments’ and the first and most important one is – we never offer deals we personally believe we will not buy hence always offering the best to our consumers.
Like consumers, we care about our merchants and have a strong team of relationship managers in our ‘partner services’ department to cater to their business problems. We act as an excellent marketing platform for our merchants and are one of the only sites that provide businesses with the opportunity to be “a hero for the day”, so they get strong promotion from the sheer number of eyeballs that notice their brand on the homepage.
We are also launching our global robust technology to cater the needs of the merchants in India. The Merchant Center is an intelligent application that provides merchants a platform to evaluate and track their performance. The launch of this technological innovation in India will mark yet another milestone in our growth trajectory while setting unmatched global standards for the Indian e-commerce industry.
It may not always be practical and financially feasible to offer hugely discounted services or products. Keeping that in mind, do you see many more players entering this field or there being a consolidation by mergers and acquisitions?
We entered the market just last year; but we have grown organically to reach the #1 rank in the daily deals category (as per ComScore data). We have put together a strong team of professionals who have many years of experience putting together an irresistible proposition for our consumers and merchants. With the internet explosion in India and increased adoption of PCs, tablets and mobiles, we only see more people going online to make decisions about where they go out and what best to buy.
In the last few months, various internet deal sites have either shut shops or have been acquired or altered their business model as they found their original deal model unsustainable. The number of serious deal sites in India has now come down to four or five, from around 40 in 2010.
Crazeal is one of the only deal sites that has stuck to its origins and have witnessed a 30 per cent growth rate per month since November 2011. We are the only deal site that is profitable globally. Crazeal today has the highest customer loyalty index; 45 per cent of Groupon customers in India come back to purchase a voucher within 30 days.
What are some of the trends you foresee in this segment say 3 years down the line?
Everyone is craving for an eShare these days; corporates are looking at diverse product mix, merchants joining hands to offer strong value propositions and consumers shifting to online purchase for obvious reasons. This ePie surely has an opportune slice for all. And with 100 million internet users supporting the e-revolution, the total number of transactions in India is set to take a leap from the present 8-10 million to 40 million by 2015.
The daily deal websites comprise India’s fastest growing web vertical. The coupon business is 16.5% of the total e-commerce audience in India, growing at the rate of 629 per cent with 7.6 million unique users a month in November 2011, as per comScore report. This clearly shows that Indian consumers who were earlier apprehensive about shopping online are now browsing more often to make high value purchases and avail experiential offers.
Internet has played a silent but important role in giving a boost to India’s consumption story. With the advent of 3G, telecommunications and high mobile penetration, e-tailing in India has intensified closing many gaps between urban and rural consumer’s tastes, preferences and consumption patterns. Currently 60 percent of our sales come from six metros with remaining 40 per cent from non-metros. We see this trend catching up fast as consumers increasingly aspire to purchase brands and lifestyle products like never before.
Right now we are seeing most of the offers are more service-related. Will deals get specific to services or products - like say a deal-a-day sites only for travel-packages or group-buying sites only for gadgets and so on?
Currently there are quite a few niche product deal sites existing in the e-commerce market. Those are primarily targeted at consumers who are always in search of discounts; even at the cost of the quality of product. But, we at Crazeal believe in being a part of our members’ lives and giving them exciting and fun things to do with no compromises on quality and experiences.
Finally, how would you explain your revenue model to a layman (If you want, this can also be off the record)
We help businesses market their services/products to a large audience, through a deal that runs for a short period of time, and only pay for the customer when he has bought the service or product. Not a penny before.