Groupon wears a new label

The dealmaker rebrands itself into nearbuy as Sequoia Capital invests Rs 100 crore into the business

Last week, when deals platform Groupon was rebranded as nearbuy in India, it surprised many. In 2014, Groupon had sold over seven million vouchers to nearly 1.2 million customers in India, many of whom bought 6-7 deals in a year. Why would a company, which had painstakingly built a brand and franchise for three years, suddenly give up its brand in its fastest growing market?

The answer lies in a change in ownership and strategy. Venture capital firm Sequoia Capital India has invested Rs 100 crore for a significant minority stake; Groupon will continue to hold a large minority stake and so would the founders, said Ankur Warikoo, co-founder & CEO, nearbuy, who was CEO of Groupon India. Also the deals and discounts company is focusing heavily on hyperlocal ventures.

WHAT’S IN A NAME?
Three name changes  in five years, as Groupon turned into nearbuy

• In January 2011, Groupon bought deal website SoSasta.com
• In October 2011, the platform was rebranded as Crazeal.com
• In November 2012, the name was changed to Groupon India
• In August 2014, rebranded nearbuy in India; Sequoia takes control

This is Groupon’s second deal with a private equity investor, after it sold 46 per cent stake in South Korea’s second ranked mobile commerce company Ticket Monster to a consortium led by private equity firm KKR Co. With this Groupon wants to maximise the value of its assets.

“India is a massive market, which calls for huge investments. It has $1.2 billion in cash but being a listed firm with a portfolio of 48 countries has its own pressures. Instead of holding 100 per cent in a small firm that looks at just one of its 48 markets, it could own a large minority stake in a bigger company,” says Warikoo, explaining Groupon’s decision.

Experts say Groupon’s move is similar to Yahoo’s investment in Alibaba. The US giant picked up only 15 per cent in Alibaba when it could have bought more and allowed it to do its business independently, hoping for an upside when Alibaba listed.

The rebranded nearbuy will continue to offer the same location-based deals like Groupon, while adding new services. Overall, it will offer deals in 18 categories, including food and beverages, travel, wellness as well as new local services such as home and auto services, online food ordering, movies and in-store shopping. “This is an untapped billion dollar opportunity,” says Mohit Bhatnagar, managing director, Sequoia Capital India.

What nearbuy hopes to do is cash in on this demand. “We want to do in services what Flipkart has done with products. Eventually, we want to be a market place for services,’’ says Warikoo. The aim is also to encourage shoppers to walk into stores as Bhatnagar said in a press statement soon after the deal was announced, “This mobile first platform will cause more consumers to walk into their stores, spas, hotels, movie halls and help them sell more products and services. The nearbuy platform is all about hyper local discovery, discounts and frictionless payments,’’ says Bhatnagar.

The technology being developed will not only help customers but will also allow businesses to optimise their capacity. “Why should a restaurant charge the same price when demand varies through the week? Yet the price on a Tuesday and Saturday is the same,” asks Warikoo. Also many restaurants or bars have happy hours but the offer is visible to people just outside the outlet.

The nearbuy app will help spread the word and enable a restaurant target more customers. For instance, when a bar or restaurant opens for the day, the manager will be able to see that there are 518 customers nearby with the app on their phone, of which maybe 78 have never been to the bar before. He could offer a 30 per cent discount using this information. “We want to be a de facto commerce player for everything local,” says Warikoo. Groupon’s technology is centralised, and this was a limiting factor for the local arm, as it hampered its ability to react to local market conditions. Today, 60 per cent of Groupon’s traffic in India and 40 per cent of business comes from mobile. nearbuy wants to be a mobile-focused app, for which it needs to spend more on technology.  

For customers, the Groupon app is available for the next six weeks after which they will be encouraged to shift to the new nearbuy app. The change in name and the technological upgrades will not change anything for the merchants (business establishments), however.

“There’s no dramatic change in the set-up, except we are getting an external investor/partner. Now, we are independent of Groupon, which should make us more agile to respond to market needs,” says Warikoo.

Soon nearbuy plans to expand its reach to 35+ cities, from 12 today. But it will have to compete with existing deal platforms like Naukri.com-backed Mydala, aggregators like Cash Karo and Coupon Dunia. Freecharge also offers deals on recharge of phones and drives traffic for offline retailers. Groupon, which enjoys 70 per cent market share, is not perturbed because of its pricing model and the stickiness it builds in. When you buy a deal on Groupon, you pay the entire price upfront. The company deducts its commission of 10-30 per cent and gives the rest to the merchant. This ensures a high rate of redemption (97 per cent) for its deals as compared to others who don’t ask consumers to pay the entire amount upfront. With this, and the new services planned, nearbuy hopes to keep the good deals going and, the good times rolling.