Groupon india strategic study
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Rise and Fall of Groupon
Quality of Subscribers Groupon subscriber database has poor quality only about 20% subscribers have ever purchased a Groupon half of these purchasers never bought another Groupon this translates into large acquisition costs per buying subscriber for Groupon compared to the small revenue these customers generate Sources of Data All financial data are obtained from the latest S-1 filing by Groupon to the SEC and Annual filings by Jasper Infotech Pvt. Ltd. (Snapdeal )
Executive SummaryIndia is an emerging economy A large consumer base is untapped.There are 151 millions internet users in India (International Telecommunication Union)Out of every 5, 3 users use online retailing website.In November 2012, 7.6 million Indians visited Coupon sites, representing 16.5 percent of Internet users in the market. Snapdeal.com led the category with 5.2 million visitors, followed by Mydala.com with 1.4 million visitors and Crazeal.com with nearly 1 million visitors.
Players in online couponing segment. (In this presentation)SnapdealGroupon India ( India subsidiary of Groupon Inc.)
Business Model5 Process6What this business Brings to the tableGuarantyBuyersSellers8Value Creation By facilitating trade Bringing together small sellers and individual buyers Giving small businesses visibility to large audiences locally Exposing individual consumers to a wide selection of daily deals to choose from9Benefits to Sellers Wide exposure Higher trial rates as compared to traditional advertising Opportunity to induce repeat business A minimum number of customers are guaranteed when a deal goes on live10Benefits to Buyers A wide selection of deals Large discounts Opportunity to try out services/products that are usually expensive Groupon guarantees the validity of the dealHow Has it Worked Out for the players?GrouponGroupon.com was launched in November 2008.
The website features daily deals on the best stuff to do, see eat and buy in 48 countries and counting.Has over 10000 employeesGroupon is the fastest growing company, reaching biilion dollars of revenue faster than anyone ever.
Groupon IndiaGroupon entered India through acquisition of the Indian deal of the day site SoSasta.com.Rebranded as crazyzeal.com, afterwards converted into Groupon India.
294th traffic rank in India. (Alexa.com)
Who visits Groupon.co.in
Groupon Inc.Revenues (Mil. $)Operating Income (Mil. $)North American DealsInternational DealsMarketingSWOTStrengths and Weaknesses Strengths Brand equity among the consumers as well as merchants A large established customer as well as merchant base Ability to innovate to offer different deals Weaknesses Highly unprofitable Running out of cash Corporate governance is an issue
Opportunities and Threats Opportunities Entering international markets via partnerships or M&As Offering a wider selection of deals Offering location-based deals Increasing the merchant base Threats Fierce competition in international markets May not find investors to fund operations
Groupon AdvantageGroupon has more than 100 million emails in the databaseGroupon has partnered with more than 75,000 merchants
Groupon has more than 100 million emails on the fileGrouponAdvantage26Groupon Inc.- The Star Groupon commands a large market share in daily deals market It is also in a market that is growing leaps and bounds However, can we label Groupon as a Star? The next few slides explain why we cantGroupon Inc. ValuationOffer Too Good To Refuse? In November 2010, Google offered to buy Groupon for $6 billion Groupon refused this massive offer they believed their potential was much more This was the first time Groupons valuation came into focus
IPO Frenzy Just before Groupon filed for S-1 with the SEC, the market put a value of $25 billion to Groupon On June 2, 2011 Groupon files for an IPO at a valuation of $30 billionAttacks on ValuationAcademicians pointed out the issues with accounting at Groupon Groupon shows increasing cash problemsOperating cash flow decreased from 290.45M in 2011 to 266.83M 2012.
Criticisms and ControversiesBusiness Development For Groupon marketing expenses mean money spent to acquire subscribers Selling, general, and administrative expenses (SG&A) mostly include the money spent on acquiring merchants Combined marketing and SG&A have been much larger than the revenue so farSmall Business Suffer Daily deals actually lead to losses to small businesses cant handle the large influx of customers with large discounts most customers dont return Groupon takes a large chunk (up to 50%) of the already discounted revenue Groupon pays only over sixty days, thus creating liquidity crunch for merchantsPrice Promotion vs. Branding Although price promotions may increase revenues in the short term, they may dilute brand equity Regular customers may start using Groupon thus reducing the revenue premium that the merchant obtains from such loyal customers
Competitive Advantage Many critics claim that Groupons business is easily replicable currently, however, only LivingSocial has emerged as a major GLOBAL competitor Facebook and many others dropped out this perhaps indicates that many dont think that the business is profitable in China and India, Groupon is struggling due to local competition Google and Amazon have entered this spaceIPO Groupon first set the IPO price at $18 per share and then subsequently increased it to $20 per share The IPO had a nice 30% pop at the end of the opening day. The stock closed at $26 The price has been volatile ever since. At one point the shares traded at as low as $9 per share.Stock Performance
SnapdealLaunched in Feb 2010 by two entrepreneurs, Kunal Bahl and Rohit Bansal,One a graduate from Wharton Business School and the other an IIT Delhi alumnus.They own Jasper Infotech a multi-channel direct marketing platform company under which Snapdeal operates.A pioneer in the online discounting market in India. It holds the 18thrank among top traffic receiving sites in India. (Alexa, Snapdeal site statistics, 2013) It is the leader in online couponing segment in India.Daily time Spent on site 6:26 minutes.
FundingRound 1: In January 2011, received a funding of $12 million from Nexus Venture Partners and Indo-US Venture PartnersRound 2: In July 2011, the company raised a further $45 million from Bessemer Venture Partners, along with existing investors Nexus Venture Partners and Indo-US Venture Partners Raised a 3rd round of funding worth $50 million from eBay and received participation from existing investors i.e. Bessemer Venture Partners, Nexus Venture and IndoUS Venture Partners. With this round, Snapdeal has raised a total of $102 million of funding.AcquisitionsIn June 2010, acquired Bangalore-based group buying site, Grabbon.comIn April 2012, acquired esportsbuy.com, an online sports goods retailer based out of Delhi.In May 2013, acquired Shopo.in, an online marketplace for Indian handicraft productsFinancial HighlightsNet loss of 81,55,8,193 cr. For the FY ending march 2012.Company expects to record 2000 cr. Of revenue for the FY 2014.Cash pile of 99,23,93,342. (FY 2012)Working Capital (excluding cash) fully financed through current liabilities.
SummaryThough revenue growth is under pressure but recent round of funding shows a promising future . Despite book losses Snapdeal has large market share and brand presence.Current economic slowdown is also responsible for a chunk of revenue growth slump.Strategic alliance with ebay will build the companys strength.E tailing segment has increased the strength and has given an edge over Groupon India.
Groupon : Way AheadGroupon has not been aggressive in the Indian market.Should resort to Inorganic growth by acquiring companies which are complimentary to its own business.Could use $ 1.2 billion dollar on its book for serial acquisitions.Adding E tailing segment will add into the revenue growth. Bank on its international brand value.Should focus on keeping fixed cost as low as possible.
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