1.3 Company Business
is an e-commerce consumer service that features a daily deal with discounts in the range of 50-90% off at leading restaurants, spas, dance classes, weekend getaways, and other forms of entertainment. Currently there are 3 broad verticals – 1) Branded products & accessories 2) Travel, and 3) Lifestyle services. Within each of these verticals, there are sub-categories, which deal with a variety of products and services ranging from electronics to dining, health and beauty, entertainment etc. Going forward, the idea is to keep innovating and offer customers a wide array of choices.
The business idea is simple. Indian consumers are not price sensitive, they are value sensitive. Everyone here loves to strike a deal, to make a bargain and avail a discount of 50% - 90%. Consumers can purchase this deal from www.Snapdeal.com and then use it anytime in the coming months. Once the customer completes the transaction on www.snapdeal.com, he/she will get their unique voucher via email and SMS. They just need to show this voucher to the merchant who will validate and redeem it. It is a very simple and frictionless process. Payments are made through credit cards on www.snapdeal.com and once the payment is received, the consumer gets an SMS and an email with a link to easily print his Snapdeal voucher. Typically the validity of the Snapdeal voucher is anywhere in between 1-3 months which gives the customer enough time to use it.
By doing so, Snapdeal helps businesses with high fixed costs to reach their breakeven point faster by acquiring good number of high lifetime value customers. Merchants are willing to give aggressive discounts as they are essentially passing the cost of customer acquisition to the consumer in the form of a discount. Of every deal sold, Snapdeal has a revenue share arrangement with the merchant, which they are very willing to engage in because of the measurable impact it can rapidly create for their business. For instance, one of the offers from “Donut House” attracted 350 customers in just 4 hrs after which the offer was removed on request of the merchant. This is the kind of impact Snapdeal had on the businesses of its partners. Today, most of its merchant clients recognizes the potential and are coming back with more deals to Snapdeal. Now, the business scenario has turned in favor of Snapdeal. More than half of the deals posted on website are inward requests from merchants.
1.4 Business Strategy
The company has a much focused business plan right from the beginning. The idea was to build the best consumer experience. Even if the idea was not very innovative it is the execution that matters. With an increased disposable income in India, rising internet penetration, and willingness for retailers to use internet as a channel for customer acquisition, there was a very large untapped market. Thus, the target customer segment for the company was obvious i.e. those who are young, earning, and not averse to consumption of life style products such as restaurants, spas, food courts, cafes, body art, tattoos, gyms, salon etc. The services were targeted at people in the age group of 18-40 years. This includes students, first time jobbers, to the mid and top level management. A tattoo deal has wide acceptance among the younger age groups, whereas an attractive travel package to Bhutan or Kuala Lumpur draws the attention of those who are slightly older.
On the merchant side, the primary target of the company was the unorganized retail players in the lifestyle segment who has the service offering but not enough scale to market their product. Snapdeal offered scale to these players through group buying mechanism. It is used as a channel to not only acquire new customers but also to liquidate perishable distress inventory. It’s a symbiotic relationship. They charge a marketing fee of 20 – 30% from the merchant, on every voucher sold through the platform. It is a free of cost service to the end customer.
The whole deal is a win-win situation for all. Snapdeal is not loosing anything as it does not have to carry any inventory. The consumers have to pay only a small token at the time of booking deal and rest of the payment is to be made only if the deal materializes. So the loss to consumer is insignificant in case he chooses not to go for the deal after buying it. For merchants, it is providing an alternative marketing channel.
SECTION 1: MARKETING
Social media for brand management
One of the biggest contributing factors to success of Snapdeal was use of social media as an effective tool for marketing. The company's social networking strategy was to target "the top-end of the pyramid, early-adopters of e-commerce.” This gave them good traction. According to the sources, the percentage of Face book followers that actually convert to users is in "significant double-digits." Group buying sites such as Snapdeal are trying to bring customers together socially in order to harness the bargaining power of groups and using social networking sites for promotion acted as a best fit in the scheme of things.
There were lots of synergies between the customers that Snapdeal was targeting and the members of social networking sites such as age group, mind set, ease of access to internet etc. Thus, the presence on Face book, Twitter and Blog has been important contributors towards attracting customers to the portal. It went a step ahead in leveraging social media platforms differentiated themselves from a dozen other e commerce sites by using it as a tool of brand management. Through these platforms, the portal engaged its customers through discussions, contests, activities, etc.
In the words of Mr. Kunal Bahl, CEO, Snapdeal, “In marketing, the biggest challenge is to keep audience hooked to the site. This is done by uploading engagement posts, keeping the conversation alive and catering to the issues faced by customers at the outlet and resolving their queries.”
To sum it up, the benefits of social media for promotion are as follows:
- It acts as a platform to take the essence of the brand to existing/potential customers
- It helps to get the feel of the market in terms of suggestions and feedbacks
- It's been an alternative channel for customer support. The amount of support request coming through social media has been significantly rising.
- Snapdeal has been able to drive revenues through deal posts on the social platforms.
The success of this strategic thinking was visible in matter of 60 days when the company’s face book community swelled to 20000+ and number of registered users went up to 3, 50,000. The company is now evaluating at an option of how to effectively use linked in and you tube as a marketing platform in future.
Offline media such as TV for better visibility
Indian consumers have this peculiar way of thinking that companies which do above the line (ATL) advertisements are “genuine”. Snapdeal quickly realized this fact and further fortified its position in the minds of consumers by resorting to traditional marketing media such as TV. They partnered with MTV Roadies and also featured in one its shows. The day the show was aired. There were 2 million visitors and 1, 50,000 new subscribers. They became the 1st non travel e commerce website to do TV advertisement. Right now it adds 1.5 million subscribers per month and by the end of the year, is aiming at 15 million subscribers. The TV ads boosted the visibility of Snapdeal and brought good number of customers and this is because when awareness meets availability, consumers act. Snapdeal has also tied up with Fever 104 to offer some deals related to the IPL team, Delhi Daredevils.
Customer Satisfaction and Complaints Redressal
Most of the e commerce players lost the advantage of being the early movers in this space as they adopted short cuts and neglected customers. But Snapdeal is in no hurry. It fully recognizes the needs of its customers. Customer satisfaction is the primary goal. The company tries to ensure that each and every customer has a seamless experience after buying goods and services from the website. They also request feedback from customers. They have a no questions asked refund policy in case any of the customers is unhappy for whatever reason. They have QA & Audit teams in place across cities whose primary job is to ensure that the customer experience is superior. They also train the merchant staff so that customers do not face any hassles while redeeming the deal at the merchant locations. Snapdeal rigorously pre-screens every merchant and even trains them weekly on things like customer feedback. All said and done, the business is not so easy. It is characterized by fierce competition, low customer retention, lack of customer loyalty, low quality of deals, short lived promotion. Company has tried to keep the consumers connected through daily SMSes about new deals. This has worked well enough but in future such SMSes will not be possible as TRAI has put restrictions on marketing massages.
SECTION 2: FINANCE
Snapdeal, started with an initial seed capital of less than $ 1 mn and till now it has gone for two rounds of funding. The series A funding happened in January 2011 with an investment of $12 mn by Nexus and IndoUS. The second round of funding happened in August 2011 with a series B funding of $40 mn from Bessemer Venture partners, as well as contributions from existing investors Nexus venture and IndoUS Venture partners. To see the tangible Series B funding from existing investors immediately after the closing of its series A funding is somewhat unusual. But lots of e commerce sites are attracting huge money recently. Kunal who is the CEO, had to say that they struggled at every turn of business in initial year but later it grabbed the eyeballs of consumers with its whopping discount prices coupons on diverse deal categories. The company plans to use the funding for further expansion to 100 cities, upgrade the portal and put in place a better database management system. Some inorganic opportunities are also on cards. In June 2011, the promoter group company Gasper InfoTech brought out Grabbon. With the funding in place, we are all set to see some consolidation in future with bigger players eventually buying out smaller firms.
SECTION 3: HUMAN RESOURCES
Being a start up, the most important element of building a successful firm was to find the right people for the right kind of role. It was not easy but having a good assessment process did help to the cause. The company is streamlined into various departments who handle specific roles. This include Business Development, Logistics, Inventory sourcing, Content, Production, Technology, Online & Offline Marketing, HR, Accounts and Customer support teams among others. The company was building an e commerce platform but they did not have good technological talent at the beginning. Prospective employees didn’t turn up for interviews. They started operations from a residential area, which made it extremely difficult to hire people. However, company has weathered many of such challenges now by having a good assessment process in place and hiring talented bright professionals. As of August 2011, the company had headcount of 500 professionals which is expected to reach 800 by year end. The next big challenge for the company is how to manage the growth so fast. Scaling large geographic region and control on the ground is no easy feat. For this reason, the company devotes considerable time to the education and training of its staff in the hope that they are building not only viral company, but a business that has long-term viability and one in which a staff member is encouraged.
SECTION 4: OPERATIONS AND I.T.
Being an internet based e-commerce co, it is important for Snapdeal to appear on the first page when someone runs a search on google or any other search engine for that matter otherwise competitors will take the business away. So, Snapdeal adopted search engine optimization, popularly known as SEO. It is a process by which you add keywords and checks site for any duplication of keywords etc. This improves the quality of web page and thus enabling your web page to appear first whenever a search is done.
Challenges
- Snapdeal is a new site with very little search engine traffic.
- Website wasn’t being found when relevant keywords were searched for. Important keywords ranked 100+ or worse.
- Search results for potential keywords like leisure, weekend activities, dining vertical was very competitive making it difficult for Snapdeal to drive all traffic to its website.
The Plan
- Get site SEO friendly by creating title and Meta tags, sitemap, broken link analysis, and duplicate content analysis. This allows the site to be indexed by search engines and directories quickly and easily.
- Aggressive vertical specific link-building strategy. An increase of in-bound links helped the Snapdeal.com to steadily improve keyword rank until a first page ranking was achieved.
- Frequent and proactive optimization recommendations, in case of any website changes, content updates, or industry updates.
- New keyword targeted pages were created to enhance scope of optimization.
- Ad Lift uses only white-hat practices, ensuring that Snapdeal.com rank improvements are search engine approved.
Results
- First page ranking for 2 competitive keywords.
- “Great deals online” – Rank on Google #3
- “Best deals Delhi” -- Rank on Google #3
- 60% increase in traffic
- Ranks achieved in 45 days.
Another major breakthrough achieved by the IT team was in web designing. The whole website is attractively designed yet simple in operation and navigation. Separate small windows are created for each deal with colourful tabs and unified themes. All older deals are posted in the right hand side bar and the latest deals are kept at the centre of the web page area. Each deal is backed by deal highlight, location, reviews, and a menu card. For each deal, a punch line is created which is essentially a summarized detail of the deal. All of this contributed to make the site user friendly.
1.5 Conclusion
This year the company is expected to close with 100cr turnover. Recent investments by venture capitalists suggest that the company is being valued at 1000cr. Less than 20 months old; Snapdeal is on its way to register a record in the history of Indian e-commerce business. It is all set for an exponential growth given its grand platform and strong foundation. But the roadblocks in the path of success are not less. The most challenging aspect of running an online deal site is to be able to build an element of trust with the end customer and establish a long term relationship. Till now company has easily managed 20% margins on each deal but with the advent of dozens of new players the competition has got intense. It would be interesting to see how company manages competition and at the same time maintains the quality of deals on offer going forward.
Business Line dated 21st March 2011.
Interview of CEO Kunal Bhal dated 16th August 2011.
Venture Beat August 2011 series.
The Economic Times dated 3rd August 2011.
The Economic Times dated July 13, 2011.
