Read a story on Scroll.in about Anisha Singh. The title was, “How an accidental businesswoman created a start-up valued at Rs 1,000 crore”. Wow! Who wouldn’t open a story that reads that line? Anisha is the co-founder of a company called, MyDala. If you don’t know already, Mydala is a website like Nearbuy or the Little app. They bring you discounts and deals from all over the industry. Be it online or offline. I have been a fan of both Nearbuy and Little. Saved me a lot of a money. But, when I started to think about it from a business perspective, how can you possibly create or put forward a business like that? This article is about the online coupon industry.
What is the Coupon industry?
Affiliate websites account for a 15-20 percent of the overall eCommerce business. And because it is a performance based model, eCommerce portals are more than happy to share the profit percentage. The online deals industry has grown into a billion dollar market. In 2013 approximately 100 million worth of coupons were sold with an expectation of a 500 percent growth over the next couple of years. According to a study by CupoNation, approximately 85% of online buyers use coupon before making a purchase. Which makes it clear as to why this industry is booming with the growth of the eCommerce market. According to YourStory, Cashkaro had alone driven sales worth 25 Crores to its partner retailers over a period of just 6 months. And, there are over 150 such deal and discount websites are operating in the Indian online retail space trying to make some percentage of the overall eCommerce market. My point is, there are very big players in the market trying to gain a market share of the Billion dollar industry. But, how sustainable is it from a true business sense?
Is this sustainable?
No matter how big the industry is, how far can you rely on other businesses to drive your business? Will eCommerce platforms rely on discounts forever to run? No, it may not. Companies like Flipkart, Jabong, and Snapdeal are getting matured. They are reducing the amount of discounts on their platform. Jabong has reduced their discounts by 8-10%. At Myntra coupons have been running at under 30%. The etailers have realized that a coupon led model is not sustainable in the long run. But online is not the only market for these deals and coupon websites. These platforms are great for the offline market as well. It can help you drive footfall into your store. Be it a new restaurant or an old beauty salon. You might as well gain a market share from the app or website and then stop using it when you’re popular.
Let’s take a scenario. I had been using an app to buy coupons for a cappuccino at a coffee shop. The discount that was offered 4 months ago, had now been reduced by 50%. So, it may very well happen that the discounts are completely taken off the app. That coffee company just made me a fan of its cappuccino and I saved a couple of bucks initially. You know how this work! But, what happens to the app that actually introduced me to this coffee shop? We never know.
My questions to you
But it is very evident that these companies are doing very well at the moment. The only question I have is how are these businesses going to survive in the longer run? Could there be an innovation driving these companies forward? Is it a good business that relies on the profit of other businesses? Your thoughts, please.