Ajit Chauhan, Director, Synergy Promotions and Marketing Services, speaks to editor-in- charge Sanjay Choudhry about the company’s discount cards and daily deals website, growth strategy, and plans to emerge as a pan-India brand in the near future.
Q. What are Synergy discount cards all about?
Synergy Promotions and Marketing Services was incorporated in 2011. Before that, we used to issue Synergy discount cards for students of the Amity University at Noida which got them discounts at local outlets, food joints, book shops, etc. Looking at the exponential growth rate of the discount market in India, we decided to commercialize these cards and take them to the corporates which could offer them to their employees and customers. When we started, Synergy discount cards were accepted at around 200 stores in Noida. Now we have 5,000 outlets India-wide where customers can avail 15-70 percent discounts in categories such as books, eateries, hotels, hospitals, and even real estate. Soon we will also have cars in our portfolio, offering discounts on servicing, parts and even purchasing a new car.
Q. How do you see the discount cards market in India?
Discount cards are an important tool for customer acquisition and retention. The Indian market for these currently stands at Rs 2,000 crores, expanding 15-30 percent every year.
However, it is very unorganized. There are many small regional players with a narrow focus on a particular category, such as restaurants. There is currently no discount-card operator which has consolidated the entire market and spread its wings countrywide under a single brand name. We are trying to fill this gap by becoming an all-India brand. We are already present in 61 cities and offer discounts in 13 major categories. So, instead of carrying multiple category-specific cards in their wallet, our customers can have just one Synergy card which works across multiple categories.
Q. Please tell us about your e-commerce portal.
Our website synergycoupons.com offers daily discount deals. Since we were already in the discount market through Synergy cards, it was a natural progression for us to move into online space. We currently offer deals on products such as bags, mobile accessories, and phones. We ship to all parts of India.
Q. What kind of tie-ups do you have with your business associates for discount cards and the website?
For the website, we tie up with vendors and for Synergy discount cards, with merchants. For example, for synergycoupons.com, we tie up with mobile-phone vendors which give us products in bulk deals. We market these by sending weekly mailers to our registered users.
Currently, this vertical is concentrated in Delhi/NCR alone, though we have plans to expand to the rest of the country soon.
For Synergy cards, we have tie-ups with merchants such as retailers, hospitals, hotels, beauty-and-wellness service providers, and food joints. We give them footfalls and the target audience, and do marketing through social media, print and TV advertisements, and our website. It is a win-win situation for both. The merchants in return give us discounts of 20-25 percent. We are perhaps the only discount card in India which offers discount deals for real-estate as well as established hospital chains such as Apollo, Fortis, and Max.
Apart from these two verticals, we plan to launch another website called synergytraveler.com where we will be offering discounted rates for flights, hotels, and holiday packages. We also currently run a portal for recharging mobile phones or DTH services.
The Synergy card costs Rs 750 and can be recharged every year by paying Rs 500.
Q. What key factors are driving the growth of e-commerce in india?
E-commerce is catching up fast. One of the factors inhibiting its growth in the country was that people did not have much trust in payment modules on e-commerce sites. Online creditcard fraud was widespread. However, slowly the confidence factor has been reinforced among online customers because of the whole paradigm shift that is taking place with respect to the safety and security measures for online payments. Today we have a number of trusted payment gateways. Many banks too provide safer solutions to make secure online payments. In early 2000, when there was a boom in this sector, the credibility problem was huge. But over the last one or two years, things have changed.
Q. What is the potential of your two verticals – the daily deals website and the discount cards – in terms of revenues?
The daily deals market in India is around Rs 2,000 crores annually, which is a huge opportunity. But one advantage of Synergy cards is that when we sell to corporates, we do good volumes. We have telecom companies, insurance firms, and banks as our stakeholders and they have a huge customer database.
They give our cards to their priority customers. At the same time, our e-commerce site is equally important for us because the market is growing at a very high rate.
Q. What is leading the growth of discount cards in India?
The most important factors are the rising consumer spending and disposable incomes. Everybody wants discounts. Indians are driven by the ABCD formula – Astrology, Bollywood, Cricket, and Discounts.
Q. Doesn’t giving hefty discounts through cards eat into the margins of retailers?
Retailers who are giving 60-70 percent discounts through our cards are looking for more footfalls in their stores. We provide these by sending e-mailers and SMSes to their potential customers free of cost. We also help them reach out to our database of over 3 lakh card members by circulating among them promotional campaigns from the merchants. So they benefit tremendously by collaborating with discount cards.
Q. How are your 3 lakh card members spread all over India? Do you see a market beyond the metros?
At present, our customer base is concentrated in the metros and the cities in north India. These account for most of our sales. But we are gradually spreading to southern India. Metros are getting saturated and businesses are increasingly moving to tier II and III cities. In these smaller places, concepts like discount cards are going to catch up very soon. We have planned a franchising model for Synergy cards in cities like Agra, Lucknow, Kanpur, Jaipur, Rajkot, Gwalior, and Indore. We plan to appoint more than 100 franchisees all over India by the end of 2012 for our cards. We are looking for people with an entrepreneurial bend of mind who want to start a new business or who already own a business in the travel and telecom sector. At present, we have about 30 franchisees.
Q. Are you targeting a franchiseebased growth or will you be expanding your own footprint too?
We will have our own footprint in the metros. To get to the smaller cities and penetrate further into India, I think the franchisee model is the best one.
Q. How do you see the industry in terms of competition?
The e-commerce and daily deals industry in India is very competitive. Many new players are entering the segment and witnessing blazing fast growth. But many of them are obsessed only with the top line and are actually selling at a loss just to build up their customer base and eventually sell stake to venture capitalists. Their valuations are based not on profit or loss, but on the number of users and the transactions taking place on the portal. The bottom line is not considered at all. And since e-commerce is booming in India, many investors are looking at acquiring these online ventures.
Q. What percentage of the market do you hold? What is your vision?
When it comes to Synergy cards, we are the market leaders. But for e-commerce, we are still looking at consolidating and building our portal. We want to expand all over India for our cards as well as the daily deals website. We are looking at covering a total of 100 cities.
We are aiming at growth that is both organic and inorganic in nature. There are many smaller portals of daily deals in India that are likely to get picked up by us in the near future. We are looking at inorganic growth in terms of increasing our members and also launching mini-portals.
We are already in talks with several leading banks in India for co-branding the Synergy cards. We currently have over 5,000 top merchants across the country in a range of categories. Many banks want to leverage on our vast database by tying up with us to acquire new customers and retain the existing ones.
Q. What are the main challenges you face in your cards business?
There are many challenges. For example, the managers of local merchants like pizza stores and clubs keep changing. If we had signed the contract with a particular manager and he leaves the job, his replacement may not be aware of the agreement and may refuse to honor the card at his outlet.
These are operational problems and around 3 to 4 percent of the total transactions get rejected because managers at outlets would not recognize or honor our cards. To take care of this, we have teams which keep making regular visits to the outlets we have tied up with, to make the staff more aware about our products and services.
Q. Which are the segments in which your customers use synergy discount cards the most? What is your marketing strategy?
Our customers are using Synergy cards mostly at restaurants and hospitals. For marketing, we have a dedicated sales team which interacts with corporate houses, talking to their HR or sales representatives to offer Synergy cards to their employees and customers. Besides, we also sell these cards online.
Our franchisees in the smaller cities of India are already leveraging Synergy cards for the local population. The discount schemes we offer through the cards are getting a very good response in smaller cities in India where their popularity spreads through word of mouth.
Q. How do you compa re the Indian market for discount cards with matured markets of the west? How do you see this evolving in the future?
The Western markets are mature. There, e-commerce has been going on for the past 10-12 years. For example, for the Americans, the kind of daily deals we offer through our website are a part of their daily routine. The first thing they do every day is to browse a number of websites for daily deals. In the West, e-commerce is quite safe and secure.
In India, the online deals may be valid for 4 to 5 days a week, with some conditions thrown in. But merchants in the developed markets are very aware about the daily deals websites and realize that these offer a huge advertising and promotional platform for them. They fully leverage the opportunity.
In India, however, educating the merchants about the daily deals schemes, especially in tier II cities, is a big problem. But I feel the phenomenon is soon going to become an important part of the Indian lifestyle. And with time, bigger brands will also start participating in the discount deals and look at the “daily deals” websites as a secure and credible advertising platform for their products and business.
Q. What are your future plans?
Synergy stands for discounts and we want to be in all the service categories. We are launching our travel portal in a few weeks. Travel claims 60 percent of India’s e-commerce pie and offers substantial discounts on flights, hotels, and holiday packages. We are also looking at other sectors and might get into online shopping for groceries and FMCG products, but these initiatives are still at the planning stages. We will start new portals initially focussed on Delhi/NCR and then take investors on board and expand operations on an all-India level. Our other portals will also be based on discounts.
Q. What are your plans for the international market?
We plan to take Synergy cards to South-East Asia and the surrounding markets. We are actively looking at tie-ups with the corporates there which will sell our cards to local customers. Our international plans are, however, still being firmed up.
We have campuses of Amity University at many places abroad. It is thus a natural progression for our discounted cards business to tap those countries and their people.
*This interview was originally published in February 2012 issue of Images Retail.