Shahir MS was looking to book a room at a three-star hotel in Chennai when he stumbled upon a start-up which asks potential guests to make a bid, instead of the traditional model which aggregates prices offered by hotels.
The average room rate, Shahir found, was Rs 2,500 a night but he made two bids and ended up with a room for Rs 700, which he booked through the reverse-auction platform Find My Stay. Understandably, he was pleased.
“This model offered me a luxury stay without causing a hole in the pocket. I could have never imagined getting a room at a three-star hotel for that kind of a price had I booked it the usual way“, he said.
Reverse auctions, a proven business model in advanced economies, are catching on in India, where a number of startups have sprouted to tap into opportunities in a range of sectors.
In the US, for example, the leading reverse-auction player Priceline is listed on the Nasdaq and has a market value of nearly $75 billion. What happens in a reverse auction is that instead of the service provider quoting the price, the customer makes the first move by suggesting a price she or he is willing to pay. This information is passed on to sellers on the platform, who then compete and make a counter-offer, if needed.
“Being Indians, negotiation is somewhere in our blood. We always love to offer our price, so why not do it in the hotel booking space“, asked Rohit Khetrapal, Co-Founder of Find My Stay.
The start-up, which has around 2,500 properties across 32 cities, has been growing at 25-30% month-on-month in the last quarter, said Khetrapal, who estimates that on average 40% of hotel rooms go vacant every day.
“We tell our hotel partners to mark the inventory they see going vacant for the next two months. Customers come to our platform to offer their price for that inventory. Customer gets it for a cheap price, hotel gets to sell an otherwise empty room without disturbing the ecosystem.“
Kausalya Nandakumar, CEO of intra-city cargo vehicle aggregator SmartShift that caters to the on-demand requirements of SMEs through reverse auctions, notes that commercial vehicle operators are now operating three-four trips a day as against one trip a day previously, with a 50-55% increase in revenue.
“SMEs spend 15-30% of their time arranging logistics. If you are spending 30% of your time arranging something, inherently, you should feel the money value of time“, she said.
The haggling has caught on. Counter-offers are made visible real-time and deals close in a matter of three to eleven minutes, with claims of co-saving of 30-50% as well as the added satisfaction of a good bargain. SmartShift has over 1,200 vehicles and more than 3,500 people who actively book through the platform, but Nandakumar admits it wasn’t easy initially.
“Uber-isation had already started in the passenger space and there were some ready models available for us, but we stuck to this model because it seemed to be the only way we could organically disrupt a set pattern in the industry“, Nandakumar said.
Introducing the technology to service providers, who mostly used basic feature phone models, was another challenge. However, the company succeeded in developing technology that works even on feature phones.
Source: The Economic Times
