Solution to Case Study #2 — SNAPDEAL , Assignment #1

Shortcomings of Coupon Publishing Business Model

Moneysavers started off with Kunal & Rohit trying to duplicate similar Coupon Booklet Publishing models that were and are still very popular in the American Market.

Although the Indian Retail market is very different and works on different scales :

1. Consumers in India make purchases ( especially for household grocery items) on a weekly basis or sometimes even on daily basis , whereas in the USA the trend is to purchase in bulk from hyper retailers and stores such as Walmart ,Target,K-mart etc. therefore pushing the use of coupons on a much larges scale as purchases are done in bulk. In India, where the retail market is dominated by small and medium kirana shops, baniyas and small sized super-markets,and the coupon booklet system is fairly new to them as they work more on one to one personal relations as the customers are in the vicinity of their stores.
2. Cumbersome to carry Coupon Booklets — Target consumers being middle class working professionals lead a diffucult life with an average of 2 hours of travel in a day,in diffucult public transport conditions to reach their workplaces.For them to carry booklets of coupons on a daily basis and keep removing and tearing up coupons for every purchase made during the course of the day is cumbersome and not practical.
3. High cost of publishing coupon booklets. — As it is a low margin business and requires a lot of manpower to meet various retailers,shops and businessmen to get them aboard to partner in the coupon generation,adding to that the cost of publishing a no. of booklets which may be used partly or may not be used at all even if sold at a cost of Rs. 50 or Rs. 500 does not cover up the manpower cost,designing cost,publishing cost, distribution cost etc.

Shortcomings of Digital Coupon Business Model(Subscription via SMS )

Being started as a FREEMIUM model it worked well, benefitting the consumers as well as the key partners, but on monetizing the same,the no of people subscribing for the same dropped considerably due to the below shortcomings :

1. Pre-paid subscription service via sms — No conumer wants to pre-pay for discount coupons without the an understanding that he is definitely going to use it for a purchase. In the case of moneysaver sms subscription service when free was being lapped up by customers but when it began to become a prepaid model customers are not interested to take on somethign without having clarity of definite purchase eventually not purchasing anythign and wasting the money paid for the subscription
2. High Technological Cost — requires a tech team to send out sms to various customers , cost of sms for each customert
3. High Business development cost / Marketing costs — once again since margins are low the cost of business development and marketing is high as the key partners are the retailers who partner with moneysavers to offer discounts on their products via coupon codes. Ultimately making the business unsustainable as margins are very low.

Solutions to above problems :

1. Convert the business model of offering coupon codes / discount coupons into an attractive website offering deals on a marketplace model where consumers can view every details of the products / service eg: images, configurations,reviews from other customers etc and take decision on purchasing the same by using the coupon code.
2. Website offers a much larger space thru a single platform to get more traction from both — various retailers as well as a huge amount of customers
3. Commission business model — on every sale — since the discounts offered is being borne wholly by the retailer — the website can charge a commission ranging between 10% to 30% on every sale made , ultimately making it a viable business