MBA Group Visit to Groupon By Chester Hiu and Stephen Allison

Our second business visit on June 20, 2013, was to Groupon in New Delhi. Our short bus ride over from Lemon Tree brought us directly to the modest accommodations of Groupon’s team India.

We met with Ankur Warikoo, CEO of Groupon in India. Mr. Warikoo was a young Indian man who had previously studied Statistics and Physics in the States, but came back to India to earn an MBA at the Indian School of Business. From there, he did a bit of entrepreneurship and consulting before arriving where he is today.

There were many Groupon-like companies in India prior to Groupon’s arrival. However, Groupon is a much bigger success by comparison. Groupon’s success in India is attributed to Mr. Warikoo’s team plan. Their plan was to court the business of well-known, quality brands and to offer these Groupon discounts to the Indian middle class whose average income was roughly 6 lakhs, or roughly north of $10,000 USD. Groupon’s strategy was to gain marketing power by offering Groupon’s services to industry leaders such as the Taj Mahal Hotel line free of cost. By signing on top tier clients, others followed suit by signing on with Groupon so that they would not be left at a disadvantage.

However, Groupon India’s successes have not been without their challenges. One of the major obstacles that they encountered was COD, or Cash on Delivery. For those who are new to the concept of Cash on Delivery, it works thusly: a customer would place an order for an item, and the item would be delivered and then paid for upon receipt.

There were two distinct problems that arose from COD. Since customers did not have to pay upfront and had no penalty for rejecting parcels upon delivery. This led to inefficiencies in the system where customers would order items only to inspect, handle, and reject it upon delivery. The delivery person would have no other option but to bring back the parcel, sometimes open or spoiled without compensation for the delivery.

The second problem was that delivery people often carried expensive goods, and were sometimes robbed and beaten for their parcels. These parcels were not yet paid for, so the burden of loss would rest on the seller or manufacturer. Initially, COD was not an option for Groupon. However, due to the large market segment that COD comprises, Groupon has started to take COD offers. Groupon’s only recourse to remedy COD problems was to limit or blacklist COD based on location and parcel worth. One entire province was blacklisted due to a string of robberies and beatings associated with COD for high-priced goods.

Language barriers also proved a formidable issue for Groupon. Groupon India currently offers its services in English, although there are many potential Hindi-only users. The core demographic consisting of the relatively wealthy Indian middle-class generally prefers English. English is typically attributed with more worldly, affluent Indians. Hindi, on the other hand, is the native tongue of many. However, through Indian perspective, “local” and “native” are attributed to inferior quality. Groupon’s advertising has to take into account these Indian perspectives as well. For example, none of Groupon India’s offers have reference to buying local, because it immediately validates a deal as inferior.

Another interesting cultural mistranslation is the English use of the word “pair”. Groupon India had offered a deal consisting of a couple of shirts and a pair of cargo shorts. Upon delivery, many frustrated Indians called Groupon, accusing Groupon of fraud. These customers were expecting to receive two sets of shirts and cargo shorts, but had only received two shirts and one pair of shorts. It was logical for them to expect two full sets, but they did not realize that the colloquial meaning of “pair of shorts” meant one item, not two. As a result, Groupon India made sure to label all deals involving the word “pair” with the exact quantity in parentheses.

Shopping online is gaining much popularity in India these recent years. Groupon has been enjoying significant year-on-year growth. Due to the right timing, good management, and a strong strategy, Groupon has evolved from a successful contender to become the industry leader in online deals in India.

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One Response to MBA Group Visit to Groupon By Chester Hiu and Stephen Allison

  1. Prof. Carr says:

    Cal Poly MBA students in India,

    I have been reading your on the road posts with great interest.

    What you are learning there about business and the global economy is invaluable. Life does not happen only in the US or sunny “it’s all good and don’t push me too hard California”.

    You are seeing there are lots of people outside of America just as smart as you/us/me, working harder, and willing to work for less. Humbling and invigorating, yes?

    The things you learn there will make you better in business back home/here. Relish and invest in every second you have there in India. There are some really, really smart people there you can and will lean a lot from, if you open up and let that happen.

    You have been given the gift of witnessing the future of business there, in emerging market countries like India.

    Cheers to you all. I wish I was on the Cal Poly MBA trip in India this year!

    – Prof. Carr

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