Meet Groupon’s Indian rival Snapdeal

Until January last year, Wharton graduate Kunal Bahl and his IIT batchmate Rohit Bansal could be spotted across restaurants and retail outlets in Delhi suburbs trying to sell discount coupons to both owners and their potential customers. 

At 25, Bahl had quit his cushy Microsoft job based in Seattle and even convinced his IIT Delhi alumni Bansal to take a leap of faith in 2007. “We used to wait for hours in the heat outside small restaurants, where we wouldn’t have eaten even if we had to pay,” says Bahl.

When a restaurant owner told the duo earlier last year that he had got five customers from their website Jasper Infotech, it became an inflection point for Bahl. He launched Snapdeal.com — now popularly called India’s answer to Groupon, the world’s biggest provider of daily online deals.

Since January this year, Snapdeal has been growing its revenues at over 100%, selling unused inventories of everything from sunglasses, wallets and even travel packages, totalling over 10,000 discounted deals everyday. “We sold about 2,200 Reebok Sunglasses, in a day, at an 80% discount deal.

About 400 packages to Kerala were sold in February. Our model is to go after unsold distress inventory,” says Bahl who along with Bansal had to shell out $3000 for buying the Snapdeal.in domain name — an investment that’s paying off well.

Along with Taggle, MyDala and Koovs.com, Indian e-commerce is now seeing a rise of young companies attempting to woo customers online with lucrative deals. 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. The employees job is to get discount deals from mer-chants. They also handle customer calls and delivery of products. With 400 staff on the payroll, Bansal and Bahl want to get a share of India’s $500 billion retail market, of which nearly 18% is services business offered by sites like Snapdeal.

Globally, Groupon created waves earlier this year when it was valued at around $1.35 billion. Snapdeal too attracted attention of the legendarySilicon Valley investor Vinod Dham in February last year. Both Dham and Bazee.com co-founder Suvir Sujan invested nearly $12 million.

The website plans to close at over Rs 100 crore in revenues by December, within a year of its starting up. “It’s the two years we spent slogging at small shops in Delhi, trying to persuade them to buy our scheme is what is helping us. After all discount and group buying sites existed before we came in,” says Bahl, his hair uncluttered, as if not slept in days. Right now, Dealoftheday.com, Letsbuy.com and Groupon owned Sosasta.com, are all competitors.

But Snapdeal claims to have 70% share. “Our first priority was to make our brand felt across India,” says Bahl. Mumbai local trains are now 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. “The eight-lakh strong jungle of IT workers in Cybercity in Gurgaon is just the audience we need,” he says.

In the middle of the floor, just outside Bahl’s cabin is an LCD screen, which shows a seven-digit number moving faster than the clock. The company just crossed five million registrations this month. “Our target audience is between 18 and 35 years who loved to spend on the nice to have things like a good restaurant dinner, a soothing spa, or a pair of luxury sunglasses.

The distributors who are not able to sell directly sell at rock bottom prices through our medium,” he says. The discounts are heavy — up to 90% on the maximum retail price. Snapdeal charges upfront about 35% of the amount of the deal, for which the user has to pay online. “Even if a user is not able to avail the service or product due to any reason, at least he has not paid the whole amount,” says Bahl.

The company has now overtaken LivingSocial in last three months in terms of number of visitors, as per Alexa.com, to become the most visited group buying site just behind Groupon.com. “We are now getting offers for acquisition running into amounts so high, that we won’t have to work a single day in our lives,” says Bahl who together with Rohit and the management team owns 50% of Snapdeal.

Websites like MakeMytrip have partnered with Snapdeal to sell unsold inventory, for instance unsold seats on a chartered plane to Bhutan, which it can’t do on its own website. “I have already made it clear that even if I wasn’t owning the website, I would rather enjoy working for it as it’s so exciting,” says Bahl, just back from a trip to Darjeeling. Bought from Snapdeal, where else?

Giant Eagle’s beer requests worry Western Pennsylvania outlets Buzz up!

Giant Eagle is bringing the battle over supermarket beer sales to the Pittsburgh region, with a plan to sell six-packs from restaurants inside some of its stores.

As food chains nationwide boost brew sales, the O’Hara grocery chain is asking the state Liquor Control Board to transfer a restaurant liquor license to a Giant Eagle Market District store expected to open this fall at the new Settlers Ridge development in Robinson. Giant Eagle is pursuing other licenses, including one for a store in Pine.

Wegmans and other grocers in the state have opened cafe-style areas in some stores that sell six-packs of beer along with other beverages. The small, in-store restaurants allow them to take advantage of recent legal interpretations of Pennsylvania’s restrictive liquor code, which bars most sales from grocery stores.

Now it’s Giant Eagle’s turn.

Spokesman Dick Roberts said Giant Eagle has yet to work out some details, such as what brands of beer it might sell, but one thing’s certain: Pennsylvania’s licensed beer distributors will fight before the Robinson store or others ring up their first sales.

The Malt Beverage Distributors Association is challenging each license transfer to go before the LCB. A board hearing examiner will schedule a public hearing in the Pittsburgh area before a final vote on Giant Eagle’s license for the Robinson supermarket, said LCB spokeswoman Francesca Chapman.

Mary Lou Hogan, executive secretary and counsel for the Philadelphia-based distributors association, said grocery chains are stripping away beer sales from neighborhood businesses that only can sell it by the case or keg, without having to follow the same rules such as limits on hours.

Peggy Alston worries sales will fall at her family’s Pike Beverage Outlet, a distributorship about two miles from Giant Eagle’s Settlers Ridge site.

“I’m not allowed to sell flowers or groceries or baked goods for extra income, but Sheetz and then Wegmans and now Giant Eagle can get licenses to sell beer,” she said. “It’s another slap in the face for small businesses, and for the customers it will mean limited choice and service.”

Another nearby Giant Eagle supermarket sends customers from other states who are used to buying beer in grocery stores to her business, Alston said.

Nationwide beer sales last year weakened in bars, restaurants and other businesses where customers typically drink on-site, while they increased 1.2 percent in grocery and convenience stores, the Beer Institute said.

“Beer and wine sales are critically important to supermarket sales,” said retail analyst Burt P. Flickinger III. While the profit margin on most groceries might be 1 or 2 cents on the dollar, he said, it averages 3 to 4 cents on beer sales.

Pennsylvania’s liquor laws hurt consumers, regional brewers such as Lawrenceville’s Iron City Brewing Co. and grocers, he said.

“When you have one of the most inefficient distribution systems in America, it adds tremendous costs for consumers and it penalizes the sales and operating profits of food retailers who, were they able to sell beer, could compete more effectively with the Wal-Marts and Sam’s and other big players,” he said.

Consumers, too, have differing opinions.

“Buying beer and wine (at the supermarket) is like getting milk and bread,” said Rob Hornison of Hempfield.

Colleen Friedline, 55, of Export opposes loosening liquor restrictions.

“There’s enough temptation for people to go out and get drunk, to ruin their lives and the lives of their families … and kill other people,” she said.

Pennsylvania’s restrictions on beer sales are thought to be the second-tightest in the nation, behind Utah, said Cris Hoel, a Pittsburgh attorney who has represented alcohol trade associations and grocery chains, but isn’t involved in the cases here.

The state’s tough stance on liquor, including its controlled beer-distribution system, dates to the repeal of Prohibition in 1933, when states were told to set their own laws.

Then-Gov. Gifford Pinchot, an ardent alcohol foe, reluctantly accepted its legalization.

“He did his best to make sure the laws were as harshly worded as they could be,” Hoel said. “We’re still living with the remnants of that today.”

Subsequent attempts to loosen controls went nowhere. Gov. Dick Thornburgh ran into opposition from religious and other groups in 1981, when he tried to sell off state liquor stores. Later privatization attempts by Gov. Tom Ridge in 1997 and, most recently, state Sen. Rob Wonderling, R-Montgomery County, failed.

Hoel noted one reason for maintaining the status quo: Pennsylvania’s wine and liquor sales generated $1.76 billion last year, putting $433 million into the state Treasury.

With the licenses it’s seeking, Giant Eagle couldn’t sell alcoholic beverages on shelves, as it does in Ohio. The Pennsylvania stores would partition off areas with at least 400 square feet that seat 30 or more people, serve food prepared on site and ring up their own sales.

Customers could buy the equivalent of up to two six-packs to carry out or order a beer or glass of wine to drink at the restaurant.

Wegmans was the first supermarket chain to open restaurants and sell beer in Eastern Pennsylvania, and Commonwealth Court in February upheld the licenses. The beer distributors association is waiting for the state Supreme Court to decide whether it will consider a further appeal.

Wegmans has obtained or is applying for licenses for 14 stores, according to the Liquor Control Board’s Web site. In addition to Giant Eagle’s applications, Weis Markets and Whole Foods Markets are moving toward beer sales in Pennsylvania.

The license for Giant Eagle’s Robinson store is the first to go before the LCB for approval. Supervisors in Pine, where a large, new-concept Giant Eagle opened in February, have scheduled a May 4 public hearing on a license transfer.

Hardcastle Restaurants to enter apparels business.

Hardcastle Restaurants to enter apparels through tie-up with city mill promoter Preethi Chamikutty MUMBAI HARDCASTLE Restaurants, the JV partner of McDonald’s India, is now venturing into the apparels business. The company will be bringing in two Disney brands — Disney Baby and Disney Jeans — into the country, in partnership with the Jalan family, the promoters of Mumbai-based Prakash Cotton Mills. The apparel business will be handled through the JV company, Global Trendz Retail (GTR).

GTR will set up ‘Bungee’ stores across the country that will house the two brands. Disney Baby is targeted at 0-4 years while Disney Jeans will target the 4-14-year olds. The company will bring in characters such as baby Mickey Mouse, baby Donald Duck, Pooh and Tigger among others. Speaking exclusively to ET, Hardcastle Restaurants MDAmit Jatia said: “After having dealt with the Indian consumer so closely through McDonald’s for the past 10-12 years, we feel, we have a good sense of their requirements.”

Kids apparel market in India is worth around Rs 13,000 crore, of which, branded retail is nearly Rs 3,000 crore and has been growing at 15-20% YoY. Gini & Jony, Weekender Kids, Ruff and Zapp! are some of the other brands in the kids-wear space.

Mr Jatia said GTR’s USP will be its price point proposition, ie, to offer value-formoney products. “The Indian consumer is price-sensitive and if you do not price your products right, then market penetration will be a challenge,” he said. GTR has opened its first Bungee store in Kalyan, a suburb beyond Mumbai. “Kalyan is a mid-segment market and is a representative of India in many sense. We shall be able to judge consumer reaction much better here,” Mr Jatia said. GTR plans to open 50 stores across 20 towns in 2009-10. Besides Mumbai, the company also plans to look at Hyderabad, Nagpur, Bangalore and Mysore.

Apart from standalone stores, Disney Baby and Disney Jeans will also be available in multi-brand outlets (MBOs) such as Shoppers Stop, Lifestyle and more. While stores in big towns would be owned by GTR, small town presence would be through the franchise route. “We will be looking at a mixture of both, as in outstation stores, a franchise can bring in local expertise which is handy,” Mr Jatia said. GTR will be investing over Rs 50 crore in store launches and market expansion over the next two years.

Arvind Verma, will be the CEO of GTR and will be responsible for the day-to-day running of the business. Mr Verma was head of Levi’s western India business and has over 15 years of experience in the garments industry. While Mr Jatia was very cryptic about what role the Jalan family will play, he said: “To keep our products competitively priced, we will be sourcing a lot of products locally. The Jalans have a lot of experience in the textile and manufacturing business, which will be useful.” What is not clear is whether GTR will be producing goods locally or importing them. But keeping Mr Jatia’s emphasis on price in mind, the Jalan family’s role could be more than just that of a promoter.

The Disney Baby brand internationally includes all kids-care products including food, toys and accessories, but at this stage GTR will only be looking at bringing in apparel products into the country.

Sodexo, Accor face ire of AHAR restaurants

AROUND 6,500-odd restaurants, that are part of the Association of Hotel & Restaurant owners (AHAR) in Mumbai, are refusing to accept meal vouchers issued by Sodexo and Accor Services. The restaurant owners claim that the two firms are charging nearly 6% on food coupons, while the agreement states that they should not be charging more than 1.5%. These coupons are widely used by lakhs of employees in Mumbai.

Sodexo did not respond to the specific queries raised by ET. It, however, added that it had a “cordial relationship” with each of its affiliated partners. Accor Services India said: “We have not heard from any individual merchants on this issue, hence, it is difficult to comment on their position or feeling.”

Many companies that do not have a canteen facility provide employees with meal vouchers, which can be redeemed at designated restaurants or food outlets. The eateries, accepting these coupons, are reimbursed by the meal pass services companies — Sodexo and Accor in this case — after deducting their commissions. Many companies pay a small component of employees’ salaries by way of meal vouchers — up to a maximum of Rs 24,000 per annum — as these are not taxable.

According to the AHAR president Narayana M Alva, both the companies are violating the previously agreed terms. “We have received complaints from our members that Sodexo and Accor have been overcharging commissions, which are way above the agreement, from restaurants,” he said. “They have started levying listing charges, courier charges, etc, and the total charges work out to around 6%. However, as per the agreement, the maximum charge should not exceed 1.5%,” he said, adding that the two firms have not yet responded to their written complaints. Mr Alva’s contention is that such high rates are further putting pressure on the margins of restaurants, which are already witnessing a drop in customers….

McDonald’s to add 40 outlets by Dec, 2009.

FAST-FOOD retailer McDonald’s will step up expansions in India after recording a 20% year-on-year growth early this year. The retailer plans to open 40 new restaurants by 2009-end, said Amit Jatia, JV partner & MD (west & south region). “We are also increasing our headcount to 7,000 from 5,000 at a time when most companies are either cutting costs or reducing employee numbers,” he said.

McDonald’s India is a 50:50 joint venture between McDonald’s and Hardcastle Restaurants for west and south India. For east and north India, the food retailer has a tie up with Vikram Bakshi’s Cannaught Plaza Restaurants. McDonald’s refrained from hiking prices despite rising pressure on input costs last year. “Currently, we do not see any reason for raising prices of our food items as the commodity prices, especially edible oil prices, have eased and our back-end supply-chain is strong enough,” Mr Jatia added. The largest fast-food retail network will invest around Rs 120 crore, excluding real estate, for its expansion. The food retailer offers services to 180 million customers every year from its 155 outlets and expects to manage the customer growth rate of 30-40% on y-o-y basis. Further, it has tied up with BPCL and HPCL to open restaurants at their upcoming motels on express highways.

Related post on MdDonald’s

Dunkin’ Donuts to offer healthier menu items

NEW YORK (AP) — Looking to entice those hungry for a healthier option, Dunkin’ Donuts will begin offering a new slate of better-for-you offerings in August.

The menu, which will debut in stores Aug. 6, will feature two new flatbread sandwiches made with egg whites. Customers will be able to choose either a turkey sausage egg-white sandwich or a vegetable one. Both will be under 300 calories with 9 grams of fat or less, the company said.

”We just felt it was important to provide some choice in our menu,” said Will Kussell, president and chief brand officer.

The new menu will be called DDSmart and will include all current and new items that either have 25 percent few calories, sugar, fat or sodium than comparable products or contain ingredients that are ”nutritionally beneficial,” the company said.

Current products that will join the new sandwiches on the menu include a multigrain bagel and a reduced-fat blueberry muffin.

Kussell said Dunkin’ will continue to add products to the menu and is currently developing several new offerings, but would not disclose any details.

Kussell said Canton, Mass.-based Dunkin’ Brands Inc. will spend several million dollars marketing the new menu.

A number of restaurants have added better-for-you options to their menus in the past few years to take advantage of a trend toward healthier eating.

”We’re staying very true to our brand and very true to our heritage,” said the company’s executive chef Stan Frankenthaler. ”We’re just growing and evolving.”

McDonald’s to invest Rs 300 crore in India operations

US fast-food giant McDonald’s said on Monday it will spend Rs 300 crore ($75 million) in India over the next three years towards expansion even as it opened its first express restaurant at the domestic airport here.

“We plan to triple the number of outlets in India by the end of 2010 from 122 at present,” Vikram Bakshi, joint venture partner and managing director, McDonald’s India, told a press conference here.

“We have also tied up with two petroleum marketing companies to open our outlets. Very soon you will see our restaurants at petrol pumps,” Bakshi said, adding that the express outlets, too, will be expanded to other cities.

The McDonald’s official said the express outlets would be based on the concept of “demand-based pricing strategy” where the number of products available will be not only limited but also priced 10-15 per cent higher.

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