The Big Deal About Group Deal Web Sites

Group buying Web sites are the latest online rage. Will they survive?

After studying law I vectored towards journalism by accident and it's the only job I've done since. It's a job that has taken me on a private jet to Jaisalmer - where I wrote India's first feature on fractional ownership of business jets - to the badlands of west UP where India's sugar economy is inextricably now tied to politics. I'm a big fan of new business models and crafty entrepreneurs. Fortunately for me, there are plenty of those in Asia at the moment.

The Big Deal About Group Deal Web Sites
Image: Sameer Pawar

When Jose Kumar wanted to advertise his new business, the Bangalore-based operator of a cold storage store could have chosen a local newspaper, dropped flyers or gone on a local radio station. Instead, he chose group buying site Taggle.com that itself had launched barely a month and a half ago.

Group buying is a transaction where consumers come together to take advantage of a discount that is offered only if a minimum number of buyers (usually 10 to 15) agree to buy that item.

The deal was simple: Buy a voucher worth Rs. 250 and use that to purchase Rs. 500 worth of products from Cold Cargo, his direct-to-home cold delivery chain. Taggle.com sold 600 vouchers in a day and Kumar got new customers. He also noticed that as many as 20,000 people clicked on his site to find out what it was all about. He says it’s unlikely that would have happened through a newspaper advert.

In the span of a year, group buying has caught the fancy of several start-ups across the country. “Institutional selling has always been big in this country. Now we’ve taken that online,” says John Kuruvilla, chief executive officer of Taggle. Taggle has already received its first round of $8.75 million funding from Battery Ventures and Greylock Partners.  

Spurred by the success of Groupon, America’s largest group buying site, companies like Mydala, Koovs and Taggle have rushed to sew up merchant deals and attract a loyal following. Add to that low entry barriers — all you need is server space and a marketing team that often works on incentives — and there are new entrants almost every month. The sites make money by charging between 20 and 30 percent commission on the cost of the deal sold.

Merchants acknowledge that it is a fine balancing act between making your brand better known and being seen as a discount offering. Saurabh Chopra who runs The Sweet Tooth Company, a confectionery shop says he would not advertise on these sites more than twice a year.

But group buying Web sites are up against formidable challenges. At 6.9 percent or 81 million people, Internet penetration remains low. Add to that, people are often chary of using their credit cards online. Increased competition has resulted in sites lowering their marketing fee. Commissions have been driven down due to newer entrants. Also the number of deals sold remains low. Koovs, which is present in Delhi, Mumbai and Bangalore, manages to do 100 deals a day in each city.

“While it’s still early days for group buying in India rapidly scaling up user numbers will be the key to success,” says to Arvin Babu, partner at Greylock Partners, a venture capital firm that has invested in Taggle.  “Building sustainable value for the merchant is the key, he adds.

For now Koovs is the only site that claims it has broken even. It launched operations in Singapore, and Thailand and Indonesia are on track to start in October. “Unless I have a hundred deals in that city I don’t start operations,” says Kanishk Shulka, chief executive of Koovs.  For others the journey proved short lived. In June, Wanamo was acquired by Dealsandyou while Grabon sold out to Snapdeals.


(This story appears in the 22 October, 2010 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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  • Gurinder Pal Singh

    You could check out www.HarDeal.com also....All deals from Snapdeal, DealsAndYou, SoSasta, Ebay and Rediff on a single page.....

    on Oct 21, 2011
  • Jerome Quadros

    DealFlats.com promotes group buying of property through real estate deals. The website has discounted price deals for group buyers of flats and apartments in Mumbai, Pune, Bangalore, Chennai, Delhi-NCR, Hyderabad and Indore.

    on Jun 25, 2011
  • Srinath

    A one deal a day site is www.fishthedeal.com. Gives good discounts on laptops, computers , KCDs and other gadgets @ great discounts!

    on Jan 13, 2011
  • Ashish

    There is an aggregator website called http://www.mydealstreet.com , which display deals from various group-deal sites in a categorized fashion.

    on Dec 23, 2010
  • Sanjay G.

    However www.GroupBuyUnited.com in Canada has been a huge success.

    on Oct 7, 2010
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