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Online players bullish on daily deals, heavy investments seen

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Online players bullish on daily deals, heavy investments seen

Interest in daily deals or online coupons sparked late in India, with a lot of activity taking place last year, when businesses like GroupOn and LivingSocial were already well established in the US. However, it wasn’t until December when GroupOn allegedly turned down a buyout offer from Google, allegedly for $6 billion, that the buzz became a roar, and today, in India, there are over 20 deals sites in operation. Some are super-specialised, like Vamoose, which offers only travel based deals, while others are highly local operations, but a few players like SnapDeal and Deals and You have been able to take the business and successfully scale it to a national operation, which is still growing rapidly.

These sites have created a template, which newer entrants like Times Internet and Rediff are now hoping to follow. But, does the market really support such moves?

Last week alone saw the launch of TimesDeal by Indiatimes, Rediff brought out Rediff Deals, while Info Edge invested Rs 90 million in In January, e-commerce giant eBay also entered this space with a daily deals offering.

The New Deal
Sanjeev Bhikchandani, Founder and Executive Vice Chairman, Info Edge India said, “As a part of our long term strategy to create further value for our shareholders, our recent investment in will be our sixth one so far. With disposable incomes on the rise, online deal sites have now emerged as a platform for users to avail products and services at huge discounts. We are happy to invest in, which pioneered the social commerce/group buying concept in India and is a leader in this rapidly growing space. They have shown an innate ability to innovate and lead the industry in bringing together merchants and their target customers. The space in which they are operating holds tremendous potential as a vastly scalable business.”

However, it is worth noting that in January, market leader SnapDeal was able to raise $12 million in funding, around six times the amount that MyDala has received.

An Indiatimes spokesperson said, “In the end it’s not a winner take all market and we really aren't thinking about everyone else; we're just trying to make a good experience for our consumers and a strong business proposition for our merchants. We think we have unique relationships with many merchants, and we also have a great connect with consumers on a number of fronts. We also have a few product ideations which will come out in the next 1-2 months which are different from what's out there today.”

Ajit Balakrishnan, Chairman and CEO, also seems unconcerned about the existing businesses in the deals space. He said, “The entry of major players will expand the market and provide variety and alternatives to consumers as well as merchants. Success in the Deals business will depend, like all other businesses, on how easy the site is to use, the kind of Deals offered and the number of cities covered.”

Disruption Due?
However, Gaurav Kachru, CEO Deals and You feels that the new entrants do not have the right kind of market experience to make a real dent against the existing players, at least not at present. Kachru said, “It’s obviously an attractive space with around 3 - 4 million USD revenue as an industry. Out of this, SnapDeal and Deals and You probably have the majority. I believe that there will be three of four majors at most, but today’s scenario of 20+ companies is a short term phenomenon. To scale up this business requires a lot of investment, but it also requires a continual development of the talent.”

He added, “The entrance of Rediff or Indiatimes doesn’t worry me too much, because I think they come from a completely different skillset. Of course, I’m not saying that they have no chance or that we’re unimpeachable, and things can change quickly. But today, with GroupOn in India and LivingSocial also looking to make a similar investment, that’s where the challenge could be, in the long run, because they will make strategic investments.”

The real challenge, which could make a huge disruption to the business model, could be if Google launches a deals based business. Facebook also has a similar product, but the business model there is slightly different, complementing deals sites instead of replacing them. If Google enters the space though, it could completely change the game for all the players.


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