Sunday, September 11, 2011

Future of Groupon and daily-deals sites (in India)

The past fortnight has seen some not-so-encouraging activity in the daily-deals sites space.  Facebook announced that it is ending its deals "test": Groupon has also postponed its proposed IPO There was also this great post on HBR on Groupon and future of online daily-deals business.

These items add credence to a growing concern on the future of group deals sites. Many industry veterans have questioned the sustainability of this business model citing high customer acquisition (sales & marketing costs) and lack of customer loyalty. I think these are valid concerns but it is early to say that daily-deals as a business is doomed to failure.

My concern with their current business model is their marketing/targeting style - I am subscribed to 3 group deals sites in India (Snapdeal, Sosasta (bought by Groupon), Fashinandyou) and receive their emails daily. However, these emails advertise all their offerings/deals and not the ones I would be interested in. This is a classic case of push v/s pull strategy. They are pushing deals on me without bothering to cater to my interests. Also, when I look for a deal on something specific - say "pizza", it is difficult to find information on their websites (there are no "Search" boxes on any of these sites). Considering that there are dozens of these sites in India (without any significant differences between them) an average shopping enthusiast will get a dozen emails each day and I am not sure if people even open these emails daily. I personally prefer searching for a deal rather than browsing through all emails.

The mushrooming of these deal sites has now led to the growth of deal aggregators (metasearch) industry i.e. sites which search for deals across these sites and put them at one location, similar to what Kayak does for OTA sites. Interestingly, there are over 20 such sites in India !! Now, how does one choose among one of these sites?

Clearly - there are just too many of these sites. With e-Commerce market in India expected to grow exponentially over the next decade, a lot of VC money has flown in India. Companies like Tiger Global, Accel Partners, Helion Venture, SAIF Partners, Norwest have been pretty active in the past two years and have invested in over a dozen startups.

While I am confident of the future of eCommerce in India, I think that daily-deals sites will soon have to change their business model to survive. Anyone interested in exploring this space further should read this great article: The Dirt On Daily-Deals Sites

63 comments:

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Awanish Aarush said...

HiRahul you post very good article.you should be subscribe on more group deals sites in India (mydala.com)and receive their emails daily.

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Many shopping sites online but if you will give best deal to user then user will attract towards you automatically. Yebhi.com also a leading online shopping portal in India.

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