Friday, July 22, 2016

Online Discount Portals Are Raking In Millions, Thanks To The Offers That Make Indian E-Commerce Sites Bleed


Price comparison and bargain hunting sites are rising to profitability on the back of deep-discounted online shopping.

At the Indian e-commerce marketplace, every day is a festival of discounts and offers. With their deep pockets, the three giants – Amazon, Flipkart and Snapdeal – are battling it out with tons of deep discounted products and offers to lure customers. This implies that while e-commerce sites lose money on sales, their buyers profit.

But the flood of discounts has given birth to a profitable side industry – price comparison and bargain hunting.

While it is no secret that Indian consumers are price-sensitive and look for a bargain, savvy online shoppers are now regularly using a range of price comparison and deal-hunting websites that allow them to find the cheapest price of a product on the internet.

How it all started?
In the summer of 2010 – a time when e-commerce was still nascent in India – cousins Mehul and Jimish Jobanputra predicted the rise of online shopping in India and launched the discount aggregator

Now, Desidime is the single largest shopping community in the country. Every month, it caters to 50 lakh people who come looking for best deals on everything, from phones to cars. The crucial reason behind the site’s popularity is its community of users, who don’t only visit looking for deals but also scour the internet and share discounts and offers that they discover.

Mehul Jobanputra, who runs the site from its Mumbai office, told that 95% of the content on the site is generated by its users.

“While half of our user base doesn’t contribute at all to the site, the other half is hyper-active and brings in most of our content,” said Jobanputra, while explaining how the site operates.

The idea is simple – customers hunt across the internet for cheap products or ongoing sales, do a quick price comparison to arrive at the cheapest deal and then share it with the community on The 60-people strong company then puts its moderators into action, who scour forums and publish the best deals on its home page, which is seen by lakhs of users every day.

Those who choose to buy a product they have seen on Desidime often follow the link given on its community forums, which earns the company a commission from e-commerce players. This is called affiliate marketing where commissions are earned on every user redirected to an online shopping site.

Even as the sites Desidime links to struggle to find profitability in a space where deep discounting is becoming the norm, it has managed to stay profitable from day 1.

Jobanputra said that the company made 80% of its revenues from affiliate commissions while the remaining 20% came through advertisements placed by brands on the site.

“Our marketing spends are close to negligible,” he said. “It started with very hardcore users who are extremely involved with hunting bargains. From there, it is a word-of-mouth game as the site is discovered by online shoppers.”

Crowded space:
However, much like the e-commerce industry on which it thrives, the price comparison space is crowded by many similar players with more or less similar offerings. This is a problem that another big player is battling.
PriceDekho site sees about 2 million visitors a month looking to compare prices of their favourite products across online retailers but is struggling to find a differentiating factor for itself.

“Right now, every player looks the same and there’s hardly any differentiation in the market, which is also responsible for the lack of revenues,” said Megha Jain, business head, “Over the long term, players will need to find their niche to cater to users and this will happen based on what consumers want.”
Unlike Desidime, Pricedekho generates all content on the site internally and it’s been trying new things in order to lure customers. For instance, it also gathers and provides reviews and product information that could help a buyer make a decision.

But so far, the niche it is aiming for remains elusive.

While PriceDekho has been profitable since its inception in 2012, revenues have dwindled in the past few months and it is just about breaking even.

“We are now offering cashback to users who purchase through our site so as to further incentivise them,” Jain said. “But it is not easy to be a third party middleman and intercept buyers before they go to their favourite online shopping site.”

Meanwhile, the e-commerce industry itself is facing unexpected headwinds from the government’s Foreign Direct Investment policy that was announced recently. Also, in March, the government released new guidelines that bar online portals from influencing prices of the products and indulging in predatory sales.
The guidelines said: “E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.”

This implies that e-commerce companies will no longer be able to discount products themselves on behalf of sellers meaning that the days of sales and deals could be numbered.

What lies ahead?
Does that mean deal hunting websites are going to disappear?

Unlikely, says Sameer Parwani who started in 2010 from a room in Boston, US. His website collects the best deals on products from the internet and sees about two lakh visitors a day on the website as well as the mobile app.

CouponDunia declared a revenue of Rs 20 crore in the last financial year and helped e-commerce sites sell goods worth more than Rs 15,000 crore. The site, however, believes that the new policy that limits discounts is going to increase its relevance even as the site is now reinvesting its profits for growth.

“It was a very profitable model back then. Now it is less so,” said Parwani. “Discounts are still happening and even offline, discounts always happen. Retail is always about some sale or some promotion running because it keeps consumer interested.”

He added that since e-commerce players were now trying to be more profitable – they would seek to increase their margins on products and might pay affiliates like CouponDunia a heftier commission.

His bet, however, like many others in the industry is on cashback. Sites like PriceDekho, CouponDunia and MySmartPrice are using extra cashback to lure users to make purchases on their sites. The process is simple: tell buyers about the available deals and share with them as commission a part of the commission the sites make, which they earn if the product is sold through them.

Even though extra cashback over existing discounts sounds like an exciting proposition – the truth is that it’s a niche within the niche price hunting industry and users will need to be convinced a lot more to start using these sites regularly.
“The major challenge right now is that cashback is not mainstream and most consumers don’t know about it,” said Parwani. “It needs a lot of awareness building in the market. It’s a very nascent industry.”

No comments: