2. 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 )
3. Executive Summary
India 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.
4. Players in online couponing
segment. (In this presentation)
Snapdeal
Groupon
India ( India subsidiary of Groupon Inc.)
6. Process
A local daily
deal is displayed
on Groupon
Buyer pays for
the deal
Groupon
collects the
payment
Seller is paid
within
contracted days
splits revenue
with the seller
The deal is valid
if a minimum no.
of people buy
Buyer may use
the deal in
prespecified
time
Buyer may
return to the
seller without
Groupon
9. Value 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 from
10. Benefits 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 live
11. Benefits 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 deal
13. Groupon
•
Groupon.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 employees
Groupon is the fastest growing company,
reaching biilion dollars of revenue faster than
anyone ever.
•
•
14. Groupon India
Groupon
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)
24. Strengths 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
25. 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
27. Groupon 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 can’t
29. Offer 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 Groupon’s valuation
came into focus
30. 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 billion
31. Attacks on Valuation
Academicians
pointed out the issues with
accounting at Groupon
Groupon shows increasing cash problems
Operating cash flow decreased from
290.45M in 2011 to 266.83M 2012.
33. Business 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 far
34. Small Business Suffer
Daily deals actually lead to losses to small
businesses
can’t handle the large influx of customers
with large discounts
most customers don’t 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 merchants
35. Price 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
36. 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
37. Competitive Advantage
Many critics claim that Groupon’s 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 don’t think
that the business is profitable
in China and India, Groupon is struggling due
to local competition
Google and Amazon have entered this space
38. IPO
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.
41. Snapdeal
Launched 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.
42. Funding
Round 1: In January 2011, received a funding of $12
million from Nexus Venture Partners and Indo-US
Venture Partners
Round 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.[5]
43. Acquisitions
In
June 2010, acquired Bangalore-based group
buying site, Grabbon.com
In 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 products
44. Financial Highlights
Net
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.
45. Summary
Though 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 company‟s
strength.
E tailing segment has increased the strength and has
given an edge over Groupon India.
46. Groupon : Way Ahead
Groupon 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.
