Strategic Management Cases Assignment

Analysis of Strategies Of

Submitted By: PRN 10020741055 10020741056 10020741057 10020741058 Name Rahul Malani Dennsi Mathew Tapan Mehta Ajit Minj

Introduction
www.SnapDeal.com is an innovative e-commerce consumer service that features a daily deal with discounts in the range of 50-80% off at leading restaurants, spas, dance classes, weekend getaways, and other forms of entertainment. Consumers can purchase this deal from www.SnapDeal.com during a fixed time interval, and then use it anytime in the next 3-6 months. Headquartered in Delhi, Snapdeal.com was launched in February 2010. The company was founded by Kunal Bahl, a Wharton graduate and Rohit Bansal, alumnus of IIT Delhi. Its parent company, Jasper (www.jasperindia.com), is a leading marketing solutions provider to majority of banks, telecom and insurance companies in India, SnapDeal prides itself in the seamless experience that it has created for the customers. Reliability and credibility is key to win consumer confidence in a novel service such as SnapDeal. It has a network of 5000 small and large retailers across the country, and this network plays a key role in scaling a service like SnapDeal very rapidly. SnapDeal is already 95 cities; hence ensuring consumers across the country can use the service. Snapdeal.com is a website which features best deals in your city offering huge discounts on the best stuff like Shopping, Travelling, Spa, Health, Entertainment, and dining. Snapdeal is now growing at a tremendous speed with 1.5 million subscribers are being added every month. Recently, Snapdeal also became the first non- travel Ecommerce company in India to launch TV advertising by collaborating with various TV shows on Channel V & MTV. Couple of months back Snapdeal introduced voucher of phone service. The new service allows users of SnapDeal to avail deals bought from the website without having to carry a print out of the deal. The transaction is carried out through the SMS message that the customer gets on the registered mobile number after buying a deal. This initiative has given good results to the company catering to the 30% of its user base which access deals on their mobile.

Product/Services offered by SnapDeal

Mobiles Perfumes Mens Apparel Womens Apparel Watches Jewelry Cosmetic Bags Personal Care Computers Sunglasses Toys Electronics Accessories

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Journey
Plan A: The early experiment As Bahl and Bansal took the entrepreneurial plunge, there was one thing they were extremely clear about; they believed discount couponing certainly works for both consumers and merchants. According to Bahl, in the U.S. there were over 400 billion coupons (in the year 2007) distributed to consumers through various channels the web, mobile and even printed coupon books. In India, this number was negligible. Snapdeals Plan A was to create a whole new category and the company launched their first product MoneySaver, a printed book of tear able coupons from multiple brands (with a particular validity per coupon). The coupon book was sold to consumers for Rs. 400. However, these discount coupons expired in a stipulated time, but Snapdeal still had these printed books, with expired coupons, lying around in its office so they moved to mobile coupons. With mobile coupons, there was no inventory; the coupons would be delivered to a customers mobile phone. Plan B: Fixing the inventory issue Snapdeal tweaked its model to deliver these coupons onto a mobile phone. For Rs. 99 per month, it would deliver an unlimited number of discount coupons. In order to buy this service, consumers had to buy a scratch card (with a unique code) for Rs. 99, send out an SMS to Snapdeal with the code, register ones phone and then start receiving the coupons. The first month was a free trial; over 1,00,000 consumers signed up. However, a very small percentage turned paying customers. Plan B didnt work either. Plan C: A model that works Bahl opted for the middle path and launched a discount card called MoneySaver Prime. It looked like a credit card and consumers were willing to buy this. The challenge was there were no retailers who sold a product like this. Bahl modified the concept again and made it a B2B2C (business to business to consumer) product. Corporate customers could use the discount card to hand out incentives to employees and customers. The cards were co-branded with a client company. This approach moved in the right direction. Profit margins were good and the company sold a few lakh discounts cards every month. Most importantly, in this phase, the company built good relationships with several merchants and brand owners. Plan D: A skeptical experiment that, in hindsight, is extremely successful It was this relationship with merchants that paved the way for Snapdeals foray into the Internet medium. In January 2010, one of its merchant-partners mentioned to Bahl about how he acquired seven new customers by selling a discount coupon online. The merchant suggested that Bahl should explore something similar. On January 26th
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2010, Bahl and Bansal spent their Republic Day holiday brainstorming the companys foray into the Internet. On February 4th 2010, with the help of just one designer and one developer, the duo launched Snapdeal.in (.com wasnt available then). Once the potential was recognised, Bahl and his team wasted no time in scaling up. From selling discount deals for retail services, it expanded to sell deals for online products and travel deals as well. It acquired Grabbon, a Bengaluru-based group-buying portal to scale further. Snapdeal also launched the Innovation Fund to acquire smaller companies which can help the company scale further. In July-August, 2010, the company had acquired a 100 per cent stake in Bangalore-based Grabbon.com In June 2011, Snapdeal adopted a remote village in India and enabled clean drinking water facilities by installing manual pumps. To show their gratitude, the villages residents decided to rename their village to Snapdeal.com Nagar.

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Value Creation through innovative business model

Snapdeal.com serves as an advertising platform for merchants and a discount platform for customers. For the merchants who partner with Snapdeal, in is a cost-effective channel for acquiring new customers. It also works as a risk-free alternate marketing channel. From the merchants standpoint, they are passing on the customer acquisition cost in the form of a discount offer. The company uses the term 'deals' to describe the discounts it offers. One deal varies from another in terms of its pricing structure. While the entire offer amount is collected upfront in some deals, other deals let customers pay a certain amount on the website and rest to the merchant. The model is quite similar to how Groupon makes revenues (or losses at the last count). Snapdeal .com charges about 35% upfront for any deal. The rest has to be paid directly to the merchant on delivery of service or good. However, unlike Groupon that have group-buying models, Snapdeal does not have a threshold number of deals that must be bought before a deal can 'go live'. Even if one deal sells one voucher, it can be redeemed.

Value for Supplier

Earning from distressed inventories - reduction in inventories. Advertising Platform and risk free marketing channel new potential for price discrimination Cost effective way of acquiring new customers

Value for SnapDeal.com

Revenue Generation by routing demand to the supplier Minimal investment in brick and mortan High returns

Value for Customer

Discount platform for customers Easy search for the supplier of service/product.

Through this model, SnapDeal sold more than 2200 Reebok sunglasses at 80% discount in a day.

Funding
$40 million in series B funding from Bessemer Venture Partners $12 million from Nexus and Indo US

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Affiliations with the supplier

SnapDeal employ large teams of salespeople to go in the field and pitch to businesses. They're treated as independent contractors. Besides, the SnapDeal also provides an application on the website named Refer a Merchant wherein the customers provide details of the merchant they would recommend their favourite merchants and employees of SnapDeal will try to get them featured on Snapdeal. The alliance with the supplier is for a particular deal only which reduces the liability for both, the supplier and SnapDeal. The real pain point that SnapDeal is addressing it is to help businesses with high fixed costs to reach their breakeven point quicker by acquiring good number of high lifetime value customers. Merchants are willing to give such 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 SnapDeal can rapidly create for their business. Recently Snapdeal has tied up with the Tata Motors in order to showcase Indica Vista in their products line up to offer amazing discount and draft a plan for the car deal. Best part is that the customers, who are vying to buy Indica Vista can avail the best discount from the Snapdeal, as this offer will not be available anywhere else. And in case if the car deal gains the success, the company will further introduce more new models for the deals.

Marketing Alliances
Snapdeals customers are primarily youngsters (age group 15-35) living in metros,tier-1, and tier 2 cities. So all their marketing efforts are focussed on the same. Below mentioned are some of the marketing endeavours undertaken by SnapDeal. They're spending a lot on social media advertising. They have more than 1 lakh fans in their Facebook page. They often run ads in radio & also organized few outdoor campaigns in malls Their ads are displayed in Yahoo home page & Yahoo is one of the most visited site in India. Running ads in Yahoo home page will definitely burn more cash by attracting many eye balls. Besides, websites like timesofindia.com, naukri.com, pagalguy.com, etc have also ads of SnapDeal. In Mumbai some local trains were painted with Snapdeal ads. In Bangalore, government buses which ferry IT workers are covered head to toe with Snapdeal banners. The multi-storeyed CyberCity towers in Gurgaon have large Snapdeal hoardings too.

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Competitor Analysis
Deals & Coupons sites have been creating buzz over past 12 to 18 months Thanks to Groupons (rumoured) Billion Dollar valuation, there has been a sudden surge in deals, discounts & group buying sites across the web. In last 2 months alone, I have heard over 5 new similar sites coming up in India alone. There are close to about 20 sites which are currently operational in India and probably equal number are coming up in next few months This space looks completely jam packed. Sites like Snapdeal.com, who came in early in this space have cashed in on their first mover advantage. With most sites spending hugely on advertising & marketing even consumers are flocking them in good numbers. According to recent report released by Comscore, close to 10% of all internet users have visited deal sites in month of June 2011, and the numbers are growing. According to the report, 4.6 million Internet users in India aged 15 and older accessed the Coupons category from a home or work computer, reaching 10.4 percent of the entire online population. SnapDeal.com, which has tripled its audience in the past year, led the category with 1.5 million visitors during the month, followed by Dealsandyou.com with 990,000 visitors and MyDala.com with 952,000 visitors.

Indian Deal Sites Market Share (June 2011)

Snapdeal.com Presence in 95 cities. Network of 5000 small and large retailers across the country. Flexibility of single coupons going live. Strong marketing team adding to high visibility. Dedicated in-house call centers to cater to customer queries.
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Mydala.com Presence in 56 cities. Network of 2000 retailers across the country. Only catering to bulk coupons. Not much visibility. Poor customer care service.

Challenges
Poor Customer Retention: According to multiple reports, it has been found that customers who have bought deals are not treated very well at the merchant stores leading to less customer retention. No Loyalty: Generally, it does not create loyalty among customers as most of the customers are free takers. They look for more discounted opportunities rather than buying at your shop again and again at normal price. Mostly all are price sensitive customers which are not tending to be most loyal of customers. Brand Image Can be damaged: By offering huge discounts, your brand becomes susceptible to a reduction in the perceived value of the customers. It also lower down the profit margin and increase the expenses. Short Lived Promotion: It can generate attention but it only last for few days. It is very difficult to build long term relationships with customers who are using coupons. Merchants need to provide excellent services to build up the relationships. Fierce Competition: Snapdeal is now facing competition from more than 30 daily deal sites. Low Quality of Deals: As business model of daily deal sites is growing, these sites are providing low quality of deals. It is very important that deals should be appealing to customers. Most of the sites are creating a need for Spa, Tattoo, etc which a consumer would not go for normally. So they should focus on fulfilling the needs of customers by understanding their requirements. More effective in Recession: It works better in recession than in normal/boom economy. The whole concept of Group Buying reached new heights in America only in the recession period. This is because retailers use these sites when they have excessive inventory esp. in recession. For example, in salons they have so many seats and beauticians. If they dont sell that 10-11 AM time slot this morning, they cannot carry that time slot in the inventory tomorrow. It perishes. In recession, there are abundance of people who prefer avoiding beauty salons and other types of luxury. Effect on Loyal Customers: It can create resentment in the minds of loyal customers as they are paying full price and new customers are getting the same services at half the price.

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Future Growth strategies

Bricks and clicks model: Only 10% of the total population uses internet in India. This leaves the 90% of the market untapped. By Setting up kiosks selling daily coupons, the non internet user market can be tapped Inorganic growth: Acquire the other daily deal sites to consolidate its position in the e market and acquire new customers. International Presence: It can foray into other South Asian countries like Singapore, Malaysia and the Philippines, markets which are similar to India, where people seek a good deal. Focus on end to end customer experience: According to multiple reports, it has been found that customers who have bought deals are not treated very well at the merchant stores leading to less customer retention. By taking the feedback from the customers and sharing the same with the service providers in order to improve the quality of the service provided. Tie up with social networking sites: Tie up with various social networking sites to link the users Snapdeal account with his social networking account. Develop a mechanism to provide a tab of Snapdeal on users social networking account. This will keep users and his friends updated about the latest deals. Develop a personalization engine: Develop a mechanism/technology which asks the user for his/her preferences and hence Snapdeal can offer qualitative deals accordingly. For e.g. A beauty conscious female should be offered deals of various beauty packages being offered by the service providers. This same deal should not be offered to a male user who doesnt have any interests in such deals. Upselling and cross selling: At the time of purchase, Snapdeal will also offer the similar and complementary items which can increase the selling , thereby increasing their top line. Develop database of affluent customer who regularly buys premium products. viz. Tommy Hilfiger watches, Apple smart phones, thereby increasing their bottom line. Increase the Product/Service offering: Increase the product offering to include high end items, consumer durables, FMCG etc. Tie up with the hospitals and laboratories to provide regular health checkups, laboratory testing etc to cater demand of different segment other than the young.

Recognitions
Snapdeal has been rated the #1 e-commerce site in India, in terms of traction by Dataquest/Sapient E-commerce Survey 2011 Won the Silver award for the Best website service category at Indian Digital Media Awards (IDMA) 2011 Featured in Business Insider as among the 10 Hot Startups to watch for in India Awarded the most innovative companies across Asia at 2011 Red Herring Top 100 Asia

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Looking Ahead
Irrespective of so many downsides, there is no stopping for Snapdeal. Now Snapdeal has also entered into offering products at huge discounts and with cash on delivery option. Apart from this, they also provide good after sale services to the customers. So, SnapDeal has a bright future ahead if they keep improving the quality of products they offer and their services.

References
http://www.snapdeal.com/ http://www.groupon.com/ http://www.iamai.in/ http://www.bcs.org/content/conWebDoc/41594 http://youngblah.com/?p=62 http://www.socialf5.com/blog/2011/07/snapdeal-an-indian-answer-to-groupon/

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