Devanjali Barma, an IT professional in Hyderabad, got to know about group buying sites through her colleague, who got a high-end perfume at half the price. One characteristic that defines average Indian consumers like Barma is their eternal search for a better deal. And group buying sites are claiming to offer better deals on almost everything—from sneakers to holiday packages.
How do these sites work, what do they offer and are they trustworthy enough? We looked at all such issues to find out whether it is worth hitting that online pay button.
What are these?
Group buying sites typically offer heavy discounts on products and services that are in demand by a group of people. The deal gets activated only when a minimum number of customers sign up for the deal. At present there are at least 20 group buying sites, including Snapdeals, Mydala, Dealsandyou, SoSasta and Taggle.
“These are platforms that help customers and merchants discover each other,” says Gaurav Chopra, CEO and co-founder, Dealsandyou.
What they offer?
Most sites provide deals on restaurants, spas, health clubs and fitness centres and even dental check-ups. Product categories include gadgets and electronic items mainly.
Vamoosevacations.com, one such site, negotiates group deals from airlines, hotels, cruise liners and offers deal ranging from 25-60%.
Discounts up to 90% are available on some of the sites but the quantum of discount may depend on the product and brand. But the pricing is better on gadgets and electronic items compared with market prices.
“The promotions encourage consumers to try something they wouldn’t normally do. For instance, enrolling for guitar lessons,” says Ananya Bubna, founder, SoSasta.com. Kreeti Valecha, a Delhi-based student, always wanted to try fish pedicure. “I managed to grab a deal for just Rs250 which included fish pedicure and services such as foot massage and reflexology. The total cost of the package is otherwise Rs1,100,” she says.
How they work?
Deals are uploaded almost every day and remain open for about two to five days. The period can, however, be extended. Once the minimum number of subscribers needed to validate the deal is reached, the deal goes live. If enough people do not take up the deal, it gets cancelled and the site intimates you by email and refunds your advance payment to your account. Some sites show you the number of buyers who have already opted for a deal.
“There are merchants that want to give deals only when there are bigger numbers. We offer deals with Essel World and it doesn’t go live till the time it reaches the tipping point of 100,” says Anisha Singh, chief executive and founder of Mydala, one of the first group buying sites in India. The size of the group also depends on the product. “For certain products such as iPhone if the merchant is fine selling five of them then we close the deal and don’t put any cap,” adds Singh.
However, Snapdeals and Dealandyou do not show the number of buyers required for a deal to go live since they go live with deals even when the volume is limited. “We have continued to innovate in this space and we don’t put any such artificial barriers,” says Kunal Bahl, CEO, Snapdeals.
The deal once bought needs to be used within a specified time frame. Some sites ask for a part advance, some others ask for the entire amount. The advance can be as low as Rs45 for a deal worth Rs350.
How safe are they?
In the absence of any regulator in this space you may have doubts before making any payment. The defence of the owners of these sites: the online space is mainly self-regulated. Online companies, such as Makemytrip, Cleartrip and Yatra, have been around for a long time and all are self-regulated, they say. “Today brands are made and killed on social media so customers are the governing council themselves,” says John Kuruvilla, CEO and founder, Taggle.
Moreover, the sites need to get proper approvals to secure payments before setting up shop. “We go through proper approvals for our payment gateways. Our sites are verified by certification agencies such as VeriSign Authentication Services,” says Singh.
It is important to check that the group buying sites dealing with third-party data is secured enough or not. Says Pavan Duggal, cyber law expert, “When you are giving sensitive information, check if the URL of these sites start with https. Also check if the sites have a secured payment gateway that authenticates your transactions. If the site is using a secure payment gateway then you will be taken to a different page. You should also see if the sites are certified by authentication service providers which issue digital signatures and authenticate electronic record and transactions.”
Choosing a site: The best parameter of judging a site is the quality of merchants featured on the platform. Some sites are selective in the businesses they feature and turn away many merchants who don’t meet quality standards. “One way to differentiate these sites is to look out for good services and brands. You should be convinced about the services or products from the merchants,” says Alok Mittal, managing director, Canaan India, a venture capital firm.
“If you don’t want to go to five different sites then you can check the deals on the aggregator site and compare the merchants, services and products before you make up your mind,” adds Mittal.
Do you get the best deal?
Though you do get discounts, you may not get the best product in return. “Mostly deals are for items that are slow-moving and may not be of the best quality and fashion because for merchants, group buying sites are a marketing platform,” says Purnendu Kumar, vice-president (retail), Technopak Advisors, a retail consultancy firm.
Discounts are basically a marketing expense to revitalize a stale customer base or attract new ones. “Normally, merchants pay upfront to advertise without knowing how many customers will come to them. Group buying sites allow them to acquire a customer with surety,” says Bubna.
Gadgets and electronic goods are usually a little dated and not cutting edge. “For instance, if a cellphone is running end of life cycle and there is stock lying, then the company may be willing to sell at a lower price by giving discounts as well as pay a certain commission to sites for clearing their stocks,” says Mittal.
Watch out for
Time frame: Though purchasing coupons is very easy, redeeming them is another question. The offer may be at a particular place and available at a particular time, which may not match with your requirement. Also, keep in mind the expiry date of a deal.
Artificial discounts: You may need to guard against inflated services, which may be actually cheaper. Says Amit Azad, director, Delhi-based Azad Financial Services, a financial advisory firm, “I got a deal for a resort at Rs499 believing it was worth Rs1,000 while the actual cost was only Rs600 at the resort itself. Then, I was promised lunch with a menu consisting of both vegetable and non-vegetable items but only vegetable items were served.”
No replacement: Once the deal is through, refund or replacement may not be possible in most sites.
No regulator: If the merchant does not honour a discount voucher, you will be left chasing the consumer complaints forum of these sites. Then there are other security issues discussed earlier in the story.
While these sites offer deals that look good, do not indulge in impulsive shopping. Check the availability, location and time frame, besides looking at other fine print before choosing a deal.