Groupon selling tears of joy or onions@Rs 9/kg; what's the deals site up to?

Yes you read it right. We are talking about the very precious onions. While all over the country people are struggling to keep up with the sky rocketing onion prices, deals site Groupon came up with a bizarre deal for India offering 1 kg of onion for just Rs 9 which is less than a fifth of market price for onion.

First things first—like every such deal there is a catch (quite a few, actually). Only 1 kg per address will be allowed (so creating new email ids to order more doesn't work), no replacement requests will be entertained (although any onion is better than no onion, should you have a problem with your delivery, it won't be replaced), only 3,000 kg of onions are up for sale daily, and that too only for seven days (so, before telling your neighbours and relatives, buy your own since there is only so much onion), cash on delivery is not available (so if you are averse to e-payments it is better to stick to the local vendor).

Most importantly, your precious onions will reach you anytime within 10 days of ordering; so if you were planning to host a dinner party with these onions, our suggestion is, plan 10 days in advance.

On a serious note, we dug into the business aspect of the deal. But as it's anyone's guess, this is a clear marketing strategy.

"This has pushed up the site's traffic tremendously and we are hoping to create a lot of buzz out of this deal," according to Ankur Warikoo, head of Groupon APAC Emerging Markets (APAC-EM).

The timing was perfect but needless to say it's all billed as a marketing expense as there is no scope in this deal for a profit or a margin. The beauty of the strategy lies in that the actual expense in the deal is quite modest. Given that wholesale onion prices are in the range of some Rs 30-40/kg and the firm is charging Rs 9 it is incurring actual cost of around Rs 6-7 lakh for the seven-day offer.

Assuming even one third of people (total 21,000) who buy the onions in the deal are new customers, the actual customer acquisition cost works around to just around Rs 100. The real task is to make sure a good chunk of them remain repeat buyers on Groupon.

However, the challenge is seeing through the logistics as the cost of procuring and delivering itself adds a cost element to the deal.

Talking to Techcircle.in, Warikoo, said, "We have never done a vegetable deal; in fact, Groupon globally has never sold vegetables."

For the deal, the company has partnered with a wholesale vegetable vendor called Kishanchand & sons. The company also had to do a lot of logistical research to get this deal in place, since it does not own a warehouse or storage facility and onions are, well, vegetables, thus needing special storage.

The onions will come to the Groupon office first and will be handpicked by the team there. In total, the company is planning to sell 21,000 kg of onions in a span of seven days. This would add to the overall cost of seeing through the deal (much above the Rs 100 we worked out). Warikoo is not revealing the full cost the firm is incurring in the offer but would hope that many of the new customers would be attracted enough to become repeat buyers on its site.

(Edited by Joby Puthuparampil Johnson)