Profitability of Daily Discounts : Examining the Entry of Group Buying Websites into India and Benefits to Merchants

We examine the profitability and implications of online discount vouchers, which is a new marketing tool that offers consumers large discounts. Consumer pay a part of the total amount in advance for the service or product they want to buy. We would also make use of a theoretical framework developed by Benjamin et. al.(2011) which entails various consideration of this business model of discount vouchers. A careful look into the price discrimination and advertising aspects of the online discount vouchers also becomes important for this business model. For providing successful price discrimination, the valuation of vouchers for consumers who have access to vouchers must typically be lower than those consumers who do not have access to vouchers. It was observed that offering vouchers is more profitable for merchants which are patient or relatively unknown, and for merchants with low marginal costs. We would also want to examine the repeat purchases by the consumers and the benefits gained by the affiliated merchants. This report would serve as basis to conduct a market research of discount voucher industry in India and the profitability of such a business model to the offering website and affiliated merchants. For such a study both consumer survey and merchants' interview could throw a lot of insight. This report also consists of a plan to gather primary data.The biggest player in India currently is Snapdeal , which could possibly face a competition from Groupon and Living Social very soon, with both these players seem to be testing Indian Markets