MyDeal.lk isn’t a new idea. Ecommerce was already a familiar concept in Sri Lanka’s business environment when Kumar Melvani, Mehraj Sally and Damitha Ginigaddarage set up MyDeal in November 2012. Four years since, there are even more ecommerce ventures in Sri Lanka, and the uncaptured market space for these is shrinking. With no claims either to first mover advantage or to disruption, the company deploys a first-follower strategy, steady on the heels of the leader.

MyDeal.lk is an ecommerce venture that focuses specifically on selling deals. Modelled on the Groupon concept, the website sells discount vouchers from suppliers of a variety of products. These range from the usual electrical items and kitchen appliances to clothes, shoes, cupcakes, mugs, hotel rooms, restaurant tables, movie tickets and even helicopter rides. Customers book “vouchers” online and print them out in order to pick up items from the MyDeal store, claim delivered goods, or – in the case of travel, entertainment and other experiences – present to suppliers.

The World Bank reports that only 25% of Sri Lanka’s population was online in 2014. Of this group, many still doubt the security of online transactions. MyDeal founders imply they are satisfied with the ten-percent of available market space they have captured with 500,000 registered users since the end of 2012 to date, but scale is essential for the sustenance of ecommerce businesses. The conversion of the offline population to online is the obvious market development strategy – the great war between the Amazons and the Walmarts of the world to claim the ground of established brick-and-mortar retailers – but Sri Lanka’s infrastructure is still not mature enough for ecommerce to venture this far. In the marketplace overcrowded vendors, there is nevertheless still a consumer that is on the hedge between the online and offline communities.

“There are so many users who will browse our website, pick out the items they want to purchase, but for various reasons drop off before checkout,” Melvani says.

Their current focus is on converting this customer into one who completes the transaction either online or at their store.

“We cannot forget the fact that there is a proportion [of customers] who despite having internet access, don’t want to complete the transaction online,” Chief Marketing Office, Sally, points out. “It’s not necessarily because they don’t trust online payment methods, but it is also because they lose key elements of the traditional bargain, say, touch and feel. You can’t compete with this in the online scenario.”

MyDeal recently moved to a strategically placed new showroom which serves the purpose of collection centre as well as physical advertising point. The concept isn’t new to ecommerce in Sri Lanka; many such companies have nondescript offices that serve the same purpose, but MyDeal is executing the strategy on a vastly different scale to that of their competitors. The store is a brilliant white block of concrete at the Bambalapitiya intersection of Bauddhaloka Mawatha and Galle Road. Set against this backdrop, the simple MyDeal logo has no competition. In the absence of fresh online space to claim, MyDeal is building its physical presence.

“It is established in the industry now, that if you want to succeed at ecommerce, you have to be omni-channel,” Melvani says. “We have the advantage of being omni-channel from day one.”

Inside the showroom, walk-in customers see an array of physical items on which MyDeal has deals, not unlike the display of a regular store. For further information, though, they do not ask a sales assistant, but turn to dedicated computer terminals on which they can browse deals available on the MyDeal website, and find what they want. To those who have no experience with the Internet and online transactions, customer service officers provide the necessary support for browsing and searching. Once the customer has found what he/she requires and made a note of the deal number and other details, “pickers” will rush into the store and bring out the item for inspection.

“If we remove this offline element, we will lose at least half of the sales we are making at the moment,” Sally says.

These guided browsing sessions help make customers who are unfamiliar with browsing or shopping on the internet more comfortable with finding what they want (and possibly paying for it too) online – pushing them one step closer to becoming an ecommerce customers. For MyDeal, the cost of running a showroom (which is unconventional in their chosen line of ecommerce) translates to the benefit of developing the market, and making sure that at least some of the customers who drop off the website at checkout, follow through with the transaction offline.

“The beauty of this customer is that when they walk into the store, they know what they want. Many of them have already done their research online,” Sally says. “So we will do everything we can to help them, because we know when they walk in that, the transaction is already complete.”

The trio then take the customer a step further to MyStore.lk. While MyDeal focuses on bargain shopping to convert non-customers to customers, MyStore offers the convenience of straightforward e-tailing to convert customers to loyal customers. The idea of online retail is, again, not new to Sri Lanka. But MyDeal has the advantage of having watched the market leader struggle through an identity crisis, shifting from discount-dealer to retailer, and not made the same mistakes. Hence, two different portals, one dedicated to infinite deals and the other to regular brand retailing by department and category.

“What we wanted to do was create something like Amazon,” Managing Director Ginigaddarage explains the difference between MyDeal and MyStore. “You don’t just go to Amazon and browse for half an hour. You go to Amazon because you want to buy something.”

MyStore.lk has 8,500 registered products, and is growing the number by 400-500 each month, with a focus on acquiring brands, Melvani says.

“If Reckitt and Coleman have Dettol and Lysol and all these products to sell, they are all listed on MyStore,” he explains. “Some of these products will from time to time get converted to deals on MyDeal.”

While MyDeal and MyStore cater to local shoppers buying locally available products, the partners have also got an avenue for local shoppers buying products from elsewhere – specifically, China. While the idea of sourcing e-tail products from non-Sri Lankan businesses to Sri Lankan customers has been tested by competitors, Shopping.lk, another website which functions under the MyDeal banner isn’t exactly that. The portal sources more than 80 million products registered on Taobao – China-based Alibaba group’s C2C trading website – creating C2C retail links that are serviced via MyDeal delivery routes, within 30 days. Revenues from Shopping.lk have been growing faster than seven percent, month on month, Melvani claims.

“One of our greatest strengths is that we make decisions on the go,” Sally divulges. “We sit together in one room, and whatever the decisions, operational or strategic, we make them very fast. So when a competitor will probably say ‘We’ve put it to the board and the decision will come in a week or two’, we have already decided and implemented.”

Well known investors Jeevan Gnanam, Nathan Sivagananathan and Anoop Kundanmal sit on the board of directors of MyDeal.lk, alongside Kumar Sangakkara and Mahela Jayawardena, but the core business continues to be handled by the three founders. The investors bought in “at a highly discounted value”, Melvani says, refusing to indicate what the exact capital injection was.

“We wanted these people on-board to strengthen us,” he explains. “We want the networking value, the mentoring.”

The three founders continue to own roughly 65% of the business.

“We’ve always evolved if something went right or wrong,” Melvani says. “We always change because the three of us can sit and make a decision and follow it through. There is no red tape and the three of us work in unison.”

Melvani is the positivist, while Ginigaddarage is the pessimist, and Sally is the quiet balancer.

“All I can say is, whatever decision, we settle it within half an hour,” Ginigaddarage laughs. “There may be arguments, but we will settle it.”

MyDeal took off the ground with a Rs100,000 investment the founders made on hardware and software which Ginigaddarage used to piece together their first laptop, and a table and two chairs. The first MyDeal offer to go online was 50% off 100 Coffee Bean vouchers worth Rs500, which sold out in two days. Melvani was able to secure the deal on account of a personal connection. The second deal advertised on MyDeal was a 50% discount on a 30-minute helicopter ride. This too, Melvani managed only because of a personal connection with the supplier, Deccan Aviation. Beyond that, it was much harder work.

“It was a very uphill task to go to somebody and say ‘I want you to give a 50% discount’ and explain to them that we were going to keep 50% of the revenue,” Melvani says.

The idea of discount marketing at the time was limited to the traditional showroom discounts geared towards stock clearance. Advertising, he says, was only TV or newspapers. But the theory behind MyDeal (as behind Groupon) is simple enough.

“If a person buys 12 cupcakes at 50% off, he’s not going to eat all 12 alone. He might eat two. But the rest are going to be shared with his friends,” Melvani demonstrates with a simple example. “So the next time they want to buy cupcakes, they will ask where those were from. We are an ecommerce company, but we are also a de-facto advertising company.”

Discounts reduce price barriers, helping convert customers from pre-sale to purchase touchpoints. More purchasing customers equates to proportionately more post-sale touchpoints and word-of-mouth marketing. Merchants or suppliers gain sales and customers, and customers get discounts. MyDeal gets traction.

Two months after launch date, the founders made another capital injection of Rs650,000. The company is now valuated at easily above Rs2 billion and employs over 75 staff members, but the founders make it a point to remain hands-on and aware.

The success of their business model relies to a certain extent on a rejection of traditionally accepted norms in how Sri Lanka does business.

“You have to give your distributor 30 days’ credit, and the distributor will have to give 60 days’ credit to the retailer,” Ginigaddarage describes the norm. “So there is a chain with a credit build-up, and every person in this chain adding 10 to 30 percent [margins].”

MyDeal eliminates the middle parties to give their customers the benefit of the discount and their suppliers quick payments.

“We are one of the very few business models that collects cash before the item has been given to the customer,” Ginigaddarage continues.

“There is no need for us to ask for 60 days’ credit, so our suppliers are very comfortable doing business with us”.

[pullquote]It is established in the industry now, that if you want to succeed at ecommerce, you have to be omni-channel. We have the advantage of being omni-channel from day one
– CEO Kumar Melvani[/pullquote]

Suppliers also get back-end access to the websites on which their goods are sold, making for transparency and good relations between the two parties.

Like every other player in the game, MyDeal initially hired marketing staff of their own to hound potential suppliers and explain the concept. The tables have turned as more and more people get online and suppliers recognize the increasing importance of ecommerce ventures in generating sales. A tenth of MyDeal sales also include B2B deals which Melvani indicates are growing.

MyDeal currently has over 1,000 suppliers, providing 1,400 deals online at any given time, Melvani says, and the team works on adding up to 75 deals a week, to increase offerings (after expired deals are subtracted) to 2,500 deals within the next six to eight months.

The website draws 10,000-12,000 visitors each weekday, Melvani says, accounting for the sale of 900-1,200 items. The value of these items can range from Rs50 for a keychain to Rs500,000 for a TV.

Apart from large or fragile items such as glassware, TVs and refrigerators, MyDeal delivers anything, anywhere, they say. The main problem with this proposition is the delivery charge, which for customers outside of Colombo, could be the equivalent (or higher) of the discount. The transaction then becomes financially unviable for the customer, Ginigaddarage explains.

MyDeal is considering physical expansion to help deal with this problem, by investing in a network of collection centres. Bulk deliveries to the area will be made on a regular basis, and customers requested to pick items up from the designated location by a designated date and time.

Delivery in Colombo and the suburbs from Ja-Ela to Boralesgamuwa and Ratmalana has already been taken to the next level with same-day delivery available for items ordered before noon. MyDeal relies on Hire1 for 24-hour delivery within Colombo and the suburbs and Aramex for island-wide delivery in a standard 2-3 days.

“Our delivery teams are quite efficient,” Melvani says. “All orders that were placed yesterday are dispatched by today.”

Additionally, Hire1 riders carrying MyDeal packages are connected to the central MyDeal system. This makes it possible for support staff at MyDeal to track these riders via GPS and address any concerns customers may have regarding order status, Ginigaddarage points out.

Eventually, the business’s inventory will be moved to a centralized warehouse outside of Colombo – not only to make delivery more efficient, but also to reduce the cost of large inventory spaces within Colombo’s business locales.

Apart from air-conditioners and non-physical items, MyDeal stocks an average of 100 units of every deal that is live on the website. When they started off at the tail end of 2012, they had a 90 square-foot space in the parking lot of the Landmark Building.

“Only two of us could be in the room at the same time,” Melvani jokes again and again. “One of the two had to leave if the third person wanted to come in.”

MyDeal outgrew that space in less than a year. Three years and two moves later, on 16 June 2016 MyDeal moved to their current 11,500 square-foot new space at Bambalapitiya. They currently use just over 50% of available space (MyDeal also does direct imports of certain items which are warehoused elsewhere with logistics partners), but Melvani is sure that if they are to keep up with the demand, the company will outgrow their new home within a year.

Within five months of opening business, the company reported revenue of Rs6 million which doubled to Rs34 million revenue for the year 2012/2013. Since then, the company has grown revenue at an accelerated rate, Melvani says. The last year has nevertheless shown a slow-down in growth, with revenue climbing 66% from the year before, compared with growth hitting up to 212% in previous years.

Melvani attributes the slow-down in growth at least in part to their insistence on staying profitable. He claims that the group of ventures under the MyDeal banner constantly maintains a positive gross profit margin, and that expansion plans, including the introduction of collection centres in strategic locations, will have to await financial viability.

“We don’t want to burn money to get market share,” Ginigaddarage says, explaining that MyDeal is interested in a sustainable business model.

Finding suppliers is no longer an issue for ecommerce businesses like MyDeal that sell discounts and offers. Growth must now focus on creating demand. One of the biggest obstacles to the business – and a contributor to the lower growth acceleration – from marketing head Sally’s point of view is internet and mobile device penetration. MyDeal has “to a great extent” got the urban population of Sri Lanka covered, but isn’t doing so well in the suburbs and rural areas because of low mobile internet usage, Sally says.

“There is nothing we can do. It’s basically a question of how the country moves towards mobile.”

A change in market growth will be proportionate to two development factors, he says. First, the cost of mobile devices must continue to fall, a trend that can already be seen even on MyDeal and other similar websites. Sally believes that within the next two to three years, the conversion of feature and analogue mobile phone users to smartphones will be complete. Most newcomers to the Internet are already those who first browse off of a mobile device as opposed to a personal computer. The second factor is the cost of browsing, which also must come down, in Sally’s understanding of the current and developing market.

“Bit price is very important,” he continues. “We are in a society that still says ‘ring-cut instead of call’.”

MyDeal must proactively employ strategies that help develop the Sri Lankan market which struggles due to these problems of internet cost and low penetration. They are at the same time upping the game on their advertising to deal with the slow-down in revenue growth. Advertising currently accounts for a mere 1% of the company’s revenue, Sally, head of marketing says, adding that they plan to increase the number to 3% in 2017.

Part of the strategy involves web highlights as well as a store-in-store concept where partners can have dedicated show-cases at the MyDeal showroom in Bambalapitiya, as well as a 19-foot screen optimized for close-range viewing – the first of its kind in Sri Lanka – installed at the front of the store, facing out on to one of the biggest intersections in the city.