Bangalore: For software professional Yamini S., discount coupons have become a preferred choice over discount sales at stores. “Why should I wait for a seasonal sale to happen to buy anything when it can be bought through coupons for same or even lesser rates at the time when I want to buy?” says the 27-year-old self-confessed shopaholic.
To cater to an increasing tribe of discount shoppers like Yamini, at least eight firms have opened shop in the past six months, offering discount coupons online or through phone messages, according to Tony Navin, co-founder of Bangalore-based Grabbon, a firm that started business in November.
These start-ups typically enter into agreements with retailers and offer discount coupons that could be printed from their websites or be sent to customers’ mobile phones as messages, which then can be redeemed at various stores.
“Ours is a specialized service for organized retailing with fixed prices,” says Anurag Aggarwal, co-founder of KhojGuru, a one-and-a-half year old start-up. “Retail discount coupons are a new concept in India and the business is growing hand in hand with organized retail sector.”
Aggarwal says his firm has turned profitable since January and plans to raise $2.5 million (Rs11.1 crore) from investors and is in advanced talks with venture capitalists, aiming to dilute equity in the range of 20- 25%. These start-ups have been enthusiastically accepted by retailers, as the coupons they offer are a good way to attract customers and push revenues over a period of time, says Aggarwal.
Some of the new firms have also been cashing in on the advantages of group buying. For instance, Grabbon offers group discounts on specialized services such as food and beverages, salons and outings.
To be sure, the going could be tough for the start-ups offering discount coupons as not all retailers are open to the idea of giving discounts through coupons.
Also, the value of discounts diminishes if retailers start giving higher discounts at their outlets, says Kumar Setu, co-founder, OffersForShoppers.
Since retailers pay these firms on the leads or customers generated, revenues of these firms are not high. Also, experts say it is yet to be seen if retailers would continue to see value in associations with these start-ups.
“While this model holds promise as Indians love to bargain, it’s still early days for these start-ups as retailers would look for return on investment,” said Ashish Sinha, head of Pluggdin, a firm that tracks start-ups in India.
Investors say couponing is a proven model globally and could work in a price-sensitive market such as India.
As consumerism takes deeper roots in the country, firms offering innovative coupons could potentially create a good business model, said Sanjeev Aggarwal, managing director of Helion Venture Partners, a venture capital firm which has been approached by such firms for funds.
In the couponing business, what to offer whom is crucial, Aggarwal says. “There has to be some degree of consumer insight, good technology and a strong relation to consumer behaviour.”