From Local Deals To Selling Products – Group Buying Pivoting Already?

In my last coverage about group buying sites I mentioned the players that have not entered the electronics and products space as “not given up yet”. To make it a little more polite I should have said “not Pivoted yet”. 1 year on and the pivoting for all the group buying sites that mushroomed in the recent past seems to be finally in visible distance.

With the step towards selling electronics and other lifestyle consumer products, the group buying players will now find their sweet spot. Already all the big and known players are pressing hard on the products pedal and soon will see the difference between selling 300 odd coupons of a local restaurant to selling 2000 odd Reebok sunglasses in the same time, with the same marketing efforts. Even more when they realise that the cost of educating and acquiring a deal from a local restaurant is much higher than getting an already active ebay seller to now offer products through their site. The cost of maintaining an army of sales guys will soon start biting them and probably investor pressure might result in shutting down of the local deals section. Also when they see 80% of the revenue coming from 20% of sourcing cost, they might as well give up pivot. But now the fight will be against more established guys like Flipkart or Infibeam, which again means lots of learning, stronger customer support and probably rebranding to come out of the nuisance of being a local deals player.

The other area that these players are looking at is coupons of newly launched ecommerce portals. If you look at it closely, group buying sites are mere mailing list with the only targeting being the city of the user. With their dynamic nature they cannot have predictability and also they cannot have SEO juice, which the established players like Khojguru (that pivoted from a local search player to coupon listing site) or cult listing sites like RetailMeNot has to offer. Though in such a case they will certainly provoke a lot of impulsive buy from little known or new ecommerce portals. In few weeks the fight for differentiation will boil down to having exclusive coupons, which again is an open game.

Coupons and promotions for local business is definitely a big business for web but the Groupon model in its current form is just not right for Indian markets. The problem with all the Groupon clones in India was that they were a blatant copy of the US model (even the FAQ section was a verbatim copy) without understanding the diversity of the Indian market or acknowledging the unorganized structure of the brick and mortar businesses. And also due to lack of friction to enter the space almost everybody jumped on the bandwagon within no time.

My fear with the current pivoting is also similar, most players moving from emailing printable electronic coupons to delivering physical goods are not digging deep into the logistics bit. Most of them are not looking to carry the pain of handling logistics or dealing with bad products. They are entering the space with mindset of just sell the product and then their work is done but that is when their real work will start. That is when the consumer will decide to write a complain on Mouthshut or a praise on twitter. And then again there will be hue and cry about e-commerce not working in India.

May be by then they will have dried down all the cash that there is in the kitty and may be then there will be no chance for pivoting. So if you are one of them, make sure you answer all the questions before you enter the space. You are not a Myntra who can sell a product at premium and afford to replace it. Your sole proposition is about selling it cheaper and any extra cost may be detrimental of your wafer thin margins going below the neutral axis.

There is nothing wrong in pivoting, it does not mean giving up, it only means giving a second try with a more experienced and learned mind. Do not worry about all the “how?” yet, things will fall in place. But if you do not have all the “why” answered, give yourself some time and enter with a determined and stronger belief in what you are willing to attempt.

What do you think of this pivoting? Will it happen? Is it worth?

What will the real Groupon do in India if these guys have already tested the model?

[Naman is a startup enthusiast and has worked with couple of Indian startups as Product Manager. He is the founder of FindYogi]

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