Launched in October 2011, Crazeal – the Indian unit of Groupon Inc, celebrates its first anniversary this month. The last year has been a roller coaster ride for them with ups and downs, some mistakes and lot of learning’s. While deal sites were painting the town red this time last year they are looked at with lot of skeptism now, thanks to the blunders made by some of the biggies and horrid customer experiences all across the web.
We catch up for a tête-à-tête with Ankur Warikoo, CEO – Crazeal about the Groupon Crazeal story, the year gone by as well as the future of Crazeal and the industry as a whole. Read on.
Pi: How are coupon sites faring in India? How has it changed over a year?
AW: We have seen quite a lot of deal sites on the verge of shutdown or not doing great business and declining visibility in the last year. And when I speak of declining visibility it is because we speak to a lot of merchants other deal players speak to as well. They keep telling us who is doing great and who is losing business. It doesn’t seem to be all that mushy for some players. The industry has really churned very fast. Deal was THE thing a year back and now no one is talking about it in a positive sense. And I feel it has got to do a lot with horrid customer and merchant experiences.
Pi: There are other coupon sites like Khojguru, Timesdeal, Snapdeal etc.Their offerings are similar with very little distinction. How does Groupon standout among them? What is the Groupon-Crazeal story here?
AW: When we started out we didn’t come in with the Groupon name so it was difficult. We literally had to start from the scratch. We had our own type of challenges and that’s what changed things around. We had to re-strategise on how we will execute in the Indian market which is way different from others.
From a distance we sat and saw the mistakes other deal sites made and decided to learn from them. There were a few things we worked on fairly concretely and thats what changed the game. No. 1 was that fact that we realised very quickly that this market is all about merchants. Customers are the ultimate beneficiaries but ultimately you are in existence because you provide an ultimate marketing platform for merchants that instantly translate into how you execute your business. Other players went completely berserk on the consumer side…advertising, marketing campaigns to acquire new customers etc; while we focussed all our energies into getting the right kind of merchants. Our mantra was it may not be the highest priced brands but it has to be a recognised and respected brand. So it could be a Mahesh Lunch home which is not one of the swankiest places but is a well known and appreciated brand for sea food in Mumbai. The second thing we did was to curate deals for the customer. We decided we will not give a laundry of deals for the customer to filter the best but well planned and executed one deal-a-day. And that has been our focus throughout.
Since we are a full priced model, where we charge the customer the full price of the deal upfront unlike other sites that charge a part of the amount upfront and the rest needs to be paid at the counter, merchants get really high quality customers. So when a customer is making this engagement he actually wants to engage with the brand. Redemption is calculated on the percentage of people who walk in into the merchant premise upon percentage of people who buy the deal. This percentage is as high as 95 per cent for us. For other players it’s less than 20 per cent. We only make money when we sell even though we get the whole money before the redemption.
Also our predominant set of customers are aged between 25-35 unlike other sites whose average age of customers is 21, mostly college students. However, our customer base is very low, not many people know about us. But those who do are very sticky and thus our repeat audience buying is as high as 48 per cent, by far the highest in the country. Also our transaction value is Rs 1300 onwards unlike other deal sites where it can go as low as Rs 49 and now zero value deals. So that’s what makes a difference.
Pi: With the growing inflation do customers prefer to come to deal sites? Are footfalls increasing? Many say that the present scenario may bring a version of American coupon sites and the American mentality to India. What is your opinion on it?
AW: I don’t think so. In the West it may be true because eating out, spa, fine dine, and luxury cruise etc is not a discretionary expense. It’s a part of their lifestyle. However, in India it is very much a discretionary expense and not an addiction.
In the context of increasing footfalls it’s a little hard for me to isolate it and relate it with inflation because we are anyways seeing crazy footfalls. So I am unsure whether it is organic growth or because of the economic scenario. To be honest I haven’t seen anything that explains a higher than usual likeliness of deal sites. There are things which are usual in a month like a woman using salon services. The need doesn’t diminish. They might look for closer or better alternatives but that’s a usual routine. So it’s not because of inflation. However, unique deals are getting more customers like lingerie collections or home linen etc but that could also be because of the festive season.
Pi: Your reputation is directly related to the merchant delivery. One wrong service and it goes for a toss. How do you ensure the customer is happy and satisfied?
AW: I completely agree with you on this point and thus our starting premise; good brand translates to good services and happy customers. We have a three step process that decides if we want to work with a certain brand or merchant. The first process is entirely based on web research. We check customer reviews for the brands we want to work with. Almost 60 out of 90 brands will have a review online. Secondly, we close all our deals face-to-face and never on phone. They are physically verified. About 95 per cent of merchants are clear at this stage. And for the rest 5 per cent which is mostly due to inflated pricing we do mystery shopping (i.e. availing the services ourselves) to know if the price tag is correct. This is the last mile and then the final decision is made.
In case we get a complaint related to the merchant or his service we refund the complete deal amount to the customer without any questions asked. We then go back to the merchant to dig the reason for customer dissatisfaction and in case the merchant was right in doing what he did we refund his amount too. That’s a business risk we take and put such cases under customer service. Two consecutive merchant complaints trigger a red flag and the deal is availed within the team. If we realise the service is not satisfactory we cancel their deal. Those who have already availed the deal are transferred to another place in the nearby locality.
Pi: With the recent Timesdeal episode now many sites are now offering free coupons. What does it mean to the customer? Are they in an advantageous position?
AW: Honestly I don’t know what to make out of this. We are not in any panic mode and not even close to it. To be frank and this might seem to be a little boasting around we are not even deterred by the Indian players…the hoop-la they create of zero deals. It is not the zero deal that matters…it is the service that does. It is the experience that matters and that is what the customer will always go back to. It is definitely an advantage to the customer as long as the deal has nothing hidden and the experience is great. However, the question always is ‘are you doing something that you can do forever or is it a gimmick or a short term effort that cannot be sustained? And will your customers still come back when you offer something for a higher charge?’ For me it is a marketing campaign and if it is their business model I cannot really comment on it. We wouldn’t do it till the time it is sustainable.
Pi. How are merchants benefitting by offering free deals or 80 per cent discounts? What is the situation in reality because while prices of everything around are increasing deals are becomes cheaper. Though it looks like a great deal to the customer but they are vary because they assume there are hidden costs or there is some mischief going around. What is it anyway?
AW: So the truth is the following. I am yet to experience any deal where the merchant has not made money. Not even a single merchant. However, that does not mean they are overcharging. It a little bit of economics but that’s what is calculated. There is a fixed cost and a variable cost. Every promotion is done at the variable cost level which means that if you can cover the cost of servicing that customer and offer a great experience then the customer will cover up your fixed costs either through positive word of mouth or repeat visit. Think of this discount as the marketing cost of the business.
Secondly, since we are deal companies and understand ROI, we go to companies that cannot advertise and ask them to sponsor a specific event or a deal. It’s great sampling for them and they get lot of feedback. The company is happy because their business objective is achieved, customers are happy because they get a great deal and we are happy because our customers are satisfied. It’s win-win for all.
Pi: What is your take on the free deal VS paid deal debate?
AW: I don’t like the concept personally because it attracts a very different kind of audience. Free deal audiences are not sticky and there is no loyalty. The day you become paid they will most likely not like you. Most Indian e-commerce sites, deal sites in particular think that it is extremely cool to be unprofitable. It’s hep to lose insane amounts of money either in marketing campaigns or by providing zero deals. I don’t subscribe to it and I am very capitalist in thought. The social responsibility of every business is to make money not to please anyone else…because if you make profits you will remain in business and deliver what is expected from you in the best way.
Pi. You have a tie-up with HT where they promote your deals? How does this whole thing work? What are the margins giving the fact that discount on deals are huge? What is the revenue share?
AW: With HT it is a content partnership and not an advertising deal. They see value in the content of our deal and we see value in the visibility they provide to us. If you see mention of Crazeal is pretty insignificant, infact it is barely visible. It just says powered by Hindustan Times. The property is called ‘Super Deals’. We just give them the content and they give us advertising space. There is no revenue share.
Pi. We heard you are bringing in the Groupon Merchant Center application in India, a first for the country. And it is pegged to change fortunes for merchants given the fact that they can now track their performance real time. How does the application work and what’s so unique about it? How soon will others catch up?
AW: Yes, it is for the first time any company has launched such an application for merchants in India. Every merchant gets a unique password and id and he can track his business with us. It provides all the information and tools the merchant needs to manage your his Groupon offers and learn about his customers. They can see how many people have bought the deal and how many have redeemed. They can also check real time how their offer is faring and can make changes to the same to get better results. This is an app that works on both iOS and Android.
See this is not rocket science. If anyone wanted to do it they could have done it long back. It’s more about the perception and mindset of the company. While they only think about customers we think about merchants. They think they are out there to squeeze merchants and get deals for customers. We are not in that league. Our company vision states that we are there to be an operating system for small and medium businesses across the world. We are now globally creating a point of sales for merchants wherein they will not only be able to track their performance real time but will also be able to do their invoicing, billing all of it from an easy to use single POS iPad system. Called ‘Breadcrumb’ it is in testing phase and has been launched as a pilot only in the US as of now but will come to other countries soon. And it is absolutely free of cost to the merchant. And that’s how we are taking the next leap to become closer and hand-in with the merchant. That’s the velocity of the company.
Pi. How has the overall growth of the company been and what are your expectations for the next two quarters?
AW: The growth has been absolutely fantastic both from the fact that when we entered we were small but also the fact that in the small period of time we have existed, we have managed to create our own identity. Others have not been that lucky to be able to match up to that level. The emphasis is to become bigger and bigger. India is one of the strategic markets for Groupon globally. The focus is not particularly to expand cities or add on new people. It is on becoming more and more powerful in the domain we are in which is fundamentally services and the followed by product etc.
Though I can’t share growth numbers I can confidently tell you that we are selling a deal/ voucher every 33 seconds. Approximate quarter-on-quarter growth is 100 percent and we are doubling every month.