The concept of online deals is new in India. What are these?
Online deals are essentially deep discount deals offered through portals. We negotiate with the merchant and come up with coupons giving about 50-90% discount. The deal is available only for 24-72 hours. The customer has to decide and buy a discount coupon within that period.
Can a retailer afford to offer such heavy discounts or are they make believe?
Merchants spend money on advertising through newspapers and radio. These are good from the branding perspective, but don’t guarantee customers. We guarantee minimum sales volumes to the merchant. From the merchant’s perspective, he gets advertising mileage, exclusive promotion on the website and in return, he offers discounts to a consumer who will definitely come since he is paying upfront.
How are these different from group buying sites and mobile coupons?
In a group buying site, you (the buyer) promise a merchant a minimum number of customers (whether you do it yourself or put up a number on the website) and the deal does not go live till the number has been met. Whereas in an online deal, there are no such minimum volumes from the customer’s side.
The portal may make such promises to the merchant, but he underwrites the volumes. So to the customer, the deal is live the moment it is offered online.
In case of mobile coupons, the mode of delivery is different. Discounts tend to be lower here as there is no guarantee that the customer will actually make the purchase. So often mobile coupons do in-store promotions. Also, every deal has some rules and fine print. For instance, a certain deal may not be available on weekends, or it may not be valid on a certain product. Since a mobile coupon is limited to 168 SMS characters, the fine print may not be clear.
What should a person bear in mind while using these deals?
The first and the most important thing to bear in mind is to read the fine print carefully. A good website will have all the terms and conditions put down clearly. You should look at all the restrictions. Also, match your requirements. For instance, if you are looking for a dinner and drinks date and the voucher is not valid on alcohol, then it’s not worth it. Also, check the validity of the voucher. If it is valid only till the month end, assess whether you will have the time to redeem it. If the voucher is valid for a longer duration, you may gift it to someone.
It is also important to think what you really want to buy. So far, we have seen that at least in the Indian context, people are very careful while selecting the deals, but the key is to look at two aspects—relevance and frequency.
For instance, if you buy every spa deal on offer you are definitely not going to utilize them all, because, in all likelihood, you may go to a spa once a month or so.
What benefits do these bring to the consumer?
The deals can get huge discounts to the consumer. The average discounts these offer are 40-50% and can be as high as 90%. A lot of healthcare services such as gyms will be glad to give an 80-90% discount. They offer the discount on a month’s package, knowing that if the customer is satisfied, he will come back for an annual package. The “try-before-you-buy” offers give heavy discounts.
Are better discounts available on services rather than products?
Yes, I think that’s true because the services sector has higher profit margins. Small retailers also offer good deals. They can’t afford to have a high advertising budget, unlike say a Reebok. Almost all big retail chains in India such as Javed Habib, Therapy Ayurveda, Gold Gym, Waterfront from Marriott, Little Italy are open to the idea.