Online deals and coupons; the new way of e-commerce

BANGALORE, INDIA: While very few e-commerce portals such as e-Bay and Amazon have been successful in expanding their business and footprints, the limitations of e-commerce have forced other portals to explore new business models to tap the potential customers on the Internet.

Among the limitations, card payment mode, Internet security and delivery of services or products have restricted large number of potential consumers from taking the e-commerce path.

However, portals such as Groupon, Snapdeal, Deals and You, Mydala, Rediff and Dealface have tried to address these limitations by offering more payment options including cash-on-delivery, advance payments, discounts deals and coupons on a daily basis, and SMS or email-based alerts for special deals and information.

These sites have tried to bring the human element in the e-commerce cycle in order to give a unique customer experience for those who are uncomfortable dealing with computers and paying through cards and Internet.

This new online business model is based on revenue sharing and promoting localized content or advertisements of businesses spanning across services and commodities such as food and restaurants, entertainment, healthcare and fitness gym, branded stores and products etc.

Unlike traditional e-commerce portals that offers specific services such as booking travel tickets or hotel rooms, sale of electronic items or products and collecting payments of utility bills, these portals today have expanded the purview of e-commerce by providing more payment options and offerings.

Leveraging the web traffics, these sites are trying to drive users to the ad contents of various local businesses and tap the potential buyers. However, if this new online business model will sustain long enough to generate revenues for these portals remains a billion-dollar question.

According to Springboard Research analyst Seepij Gupta, the ad revenue is definitely a prevailing business model. But he personally considers it will not last long.

“Many entrepreneurs looking at the Indian market have found it difficult to choose a particular type of online business model such as the Amazon or e-Bay,” he says.

Gupta explains that there are three types of online business models depending on the services or products such as pay online-consume online, consume online-pay offline and pay offline-consume offline.

Indian consumers are concerned about security and payments

He further adds that there are four kind of consumers: the first type consumer does not use the Internet, the second type wants information about product or service but won't buy, the third type wants to buy on the Internet but is concerned about security and payments, while the fourth type just goes online and buys.

Interestingly, Gupta observers that Indian users falls in third category who vary about the security issues and payment modes. He adds that this is the reason why some of the portals have adopted new model of e-commerce using deal discounts and coupons.

Going back on how to sustain online business or e-commerce, Gupta said, “Portals will have to look beyond ad revenues, as the maintenance cost of sites will rise. They won't be able to offer free ad or classified space and will have to charge for hosting ads or use the pay-per-click method."

“These websites will have to monetize by creating or building micro sites for businesses, use the location-based ads or content as well as tag ad content for mobile ads search. Also, they can charge premium for placing ads at specific position on web-page,” Gupta concludes.