Local deals business is dying and this is clearly visible from the move towards selling more products. We have talked earlier about how products (and not just spa deals) make more sense given the larger target audience that it can cater to. For the same amount of tie-up effort one can do more number of transactions and with same or higher net revenue per transaction.
In an attempt to show more transactions to investors and keep the users engaged some daily deals sites are creating a new vertical, that of sweepstakes or lucky draw. As a user, you are asked to pay up a minor amount, say Rs.29 to enter a sweepstakes that could win you a holiday worth Rs.15000 or a Blackberry mobile worth Rs.10,000 etc.
Going by the books, this is illegal in most states of India. And if these sites would have limited to pure sweepstakes then users wouldn’t have received it well. But they have a turn around for that. If you don’t win the sweepstakes, the amount you paid will be maintained as e-wallet balance for your future purchase on the site.
Is it good or bad? There is no generic answer to this. But definitely this move shows a clear desperation and is an indicator of that, not all is well. But then as long as it works for the site and users stick to it, everything is fine.
This move has 2 added benefits for the site. Firstly, it provisions a negative working capital. It’s almost like micro-funding your venture from your users. Had they asked directly for maintaining prepaid wallet, the effect wouldn’t be same. One other benefit is increase in transaction volumes. Users are more likely to spend the balance of their e-wallet then spend real cash. There is lesser mental friction. Psychologically, it’s virtual currency and accelerates the spending in the same way that credit card does vs. currency bills or Sodexho food coupon does vs. real cash.
Is it doing good? Given that there were only one such sweepstakes on these sites earlier and now there are dedicated mailers only for sweepstakes with 4-5 such offers, these must be definitely doing well.
Though one thing they should try is to actually improve the product. Get some real deals with easy process flow (T&C) on the site that users are not embarrassed to use at the merchant’s. This might help me finish up my wallet balance and enter more sweepstakes. This will solve more problems for them.
Have you bought into any of those sweepstakes? What do you think about such “innovative methods” to make users spend?
[Naman is a startup enthusiast and has worked with couple of Indian startups as Product Manager. He is the founder of FindYogi]
