05 Jul Niche Startup Rides the Daily Deals Wave
The Daily Deals internet space is getting pretty crowded nowadays. With the wildly successful, and subsequent market valuations of, Groupon and Living Social, Google has stepped
in with Google Offers. And Yelp is trying to do its thing on a slightly smaller scale with local merchants. DesiSauda founders Seshu Madabushi and Srinivas Dharmadhikari have
identified an untapped niche market…serving the South Asian community in Dallas. There are also operations in Houston and plans to get a footprint in the Bay Area soon. The name DesiSauda stems from “Desi”, loosely translated as South Asian peoples and culture, and “Sauda” which in Hindi means bargains, or deals. I recently spoke with Mr. Madabushi about the business model and what prompted them to start DesiSauda.
LaunchDFW: Besides catering to the South Asian community, how are you different from Groupon, Living Social, et al?
Seshu Madabushi: From an end customer perspective we are very much similar to the big players, except for that we are concentrating on a very niche market.
LDFW: How is your business model different from the heavy hitters?
SM: We compete with the heavy hitters by offering comprehensive solutions to the business customers (merchants who are putting deals on our site). We are creating an eCommerce
platform for these merchants and create a community around this. Also we cut a check (less commissions) to the merchants (100%) before any customer is walking through the door.
LDFW: In our earlier discussions, you mentioned that your technical work was done overseas. Why was the decision made to off-shore your tech/dev work? Was it simply because of cost?
SM: Cost as well convenience. We want to focus our energies on market development and also our core competency was not in design (aesthetics) and coding.
LDFW: There was a recent opinion piece on Tech Crunch that was critical of Groupon’s business model, particularly with respect to loan sharking and repeat customers. How do you address those concerns with your merchants?
SM: A little background of how we view this model:
We view this model as another advertising medium which is accountable (we bring customers through the door) and effective (people like to save). Also two aspects of this model – great discounts for customers to try and heavy margins for the providers. So the first aspect is important as we are giving an incentive for people to come and try a business and this will continue as it is today (may be a little bit toned down).
How we operate:
1) To start with we provide weekly deals – 3/4 deals every week so that our merchants are getting that exposure on our site for a week
2) During this week – we promote them through offline and online advertising giving them the max exposure
3) We charge a nominal fixed and a low variable cost for which the value accrued to them is far greater than their costs
4) We also take pride in our customer service as this video showcases – http://www.youtube.com/user/DesiSauda#p/u/0/XBljNOiqpb4
LDFW: But how would merchants know if their DesiSauda customers were already customers of those merchants, and thus would have patronized the merchant anyway?
SM: There is no way we can restrict deals – anyone can buy this. With aggressive deals we try to attract new customers as well.
LDFW: Do you recommend that the merchants impose caps on the number of coupons that can be purchased for a given deal?
SM: Yes we ask merchants to impose caps. This way the merchants are not overwhelmed.
LDFW: How do you handle unredeemed coupons?
SM: We give the merchant the money that we collect from end customers in advance. So it is up to the customers to go and redeem it. We haven’t encountered a situation where a coupon wasn’t used. As a company we will try to work with the merchant to accept the coupon as it was already paid for.
LDFW: What are your plans for the mobile platform?
SM: We are creating a mobile platform as we speak that offer the same services and more.
LDFW: Why do you feel this will be successful? What if Groupon, Living Social, Google Offers, Yelp, or any other competitor enters the South Asian space?
SM: There have been numerous instances where a large player created a market and niche players entered that space catering to a particular segment. We are also in the same boat
— Groupon, LivingSocial have created the market, educated the masses and proved that this model works. We are entering into this space where our budget to educate the customer
is lowered and there is a wave around this model. We know the South Asian space, we know what a South Asian customer is looking for and where he is looking for it. Also large
players are trying to spread geographic (horizontal expansion) rather than targeting a vertical and that is where we are.
When I asked Mr. Madabushi if a large firm (such as Groupon or Living Social) wanted to buy out DesiSauda, would Desisauda be ready to sell, he coyly responded, “It is a hypothetical question.” As this market matures, the larger players will likely start gobbling up the smaller ones to consolidate, cut costs, and stay competitive. But the market isn’t ready for that quite yet. It’s still early. We’ll have to wait and see what the future holds.
Here is a customer testimonial video from a local Shahnaz salon.
And Mr. Madabushi is writing a blog about his entrepreneurial experiences. To catch up on his thoughts, check out http://desisauda.wordpress.com.