Author: Ashok Reddy, Founder and CEO, GrabOn
The human tendency to make a saving can be traced back to pre-historic times. Coupons which trigger our in-born inclination to conserve have for long been playing a major part in sketching business strategy for companies. First offered in 1888 by Coca Cola, the coupon industry today has evolved into a major business worth $20 billion, particularly since the advent of the internet and digital media. A large chunk of global coupon market share is now attributed to digital coupons owing to the exponential rise of eCommerce. Here’s a look at how the coupon industry in India fares in comparison to the major players such as USA.
Couponing behavior is linked to the internet usage statistics of a country. USA has a much higher rate of internet penetration of 86.75 percent as compared to India’s paltry 19.10 percent. Somewhat interestingly, India lags only behind China in the number of internet users in the country despite the poor penetration, ahead of the United States which is at third place. Higher internet usage stats and better connectivity have given rise to several eCommerce portals and online shopping platforms. The Indian eCommerce industry was worth $12.6 billion in 2013, representing a 70 percent increase on the previous year.
While the recent proliferation of the eCommerce model has fuelled the growth of coupons and affiliate industries, the coupon industry in India has grown at a much quicker pace. Statistically, the digital coupon distribution numbers in the US stood at 329 billion in 2013, offering a saving of $1,617 per US citizen. However, out of these, only coupons worth $3.7 billion were taken advantage of by the consumers. In comparison, Indian consumers redeemed coupons worth 100 million and more, accounting for share of 13.5% from the total eCommerce market in 2013. The coupon industry in India is expected to grow by 500 percent during the next fiscal year as compared to a meagre 3.6 percent increase in the US coupon market.
The disparity in coupon markets between the two countries can be mainly attributed to the mindset and proliferation of services. Indian consumers are still coming to terms with online shopping, preferring the “cash on delivery” or COD approach. US consumers, on the other hand, utilise credit card and online payment services. This is a major reason why eCommerce portals in India aggressively offer coupons to attract more customers to utilize their services and build the trust factor with the consumers. Moreover, the dramatic increase in the number of internet users in India and the corresponding proliferation of eCommerce platforms requires the eCommerce portals to offer generous deals. This helps to keep them in visibility and increase their website traffic by targeting both existing and untapped customers.
There are over 150 couponing websites operating in India, leading the space to be overcrowded. Most of these couponing websites are operating on an extremely limited vision, trying to milk the profits of the eCommerce industry while the boom lasts. Penetration and awareness amongst tier 2 and tier 3 cities, which house the majority of the population, also needs to be focused upon. Another major challenge is the lack of innovation in the sphere. Therefore optimizing the potential of the Indian coupon market is essential to ensure sustained growth.
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