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PARIBUS — reclaiming $$$ that stores owe YOU.

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3-Part Alignment <—-Please click on link to see visual.

 

INTRODUCTION

“Dynamic pricing can make it hard for online shoppers to know if they’re getting the best price – Amazon makes over 80 million price changes per day –but retailers often offer price match guarantees.” [1]

Well, here comes PARIBUS. PARIBUS is an automated plugin that connects to users’ email, reviews online purchase receipts, and files for price readjustment claims on behalf of the users—the very instant that the price drop occurs across participating retail and outlet stores. [2]

Colloquially put, if I purchase a couch for $500 from Amazon.com on December 21, 2015—and if Amazon.com then discounts that price to $400 a month later, Paribus automatically reimburses a portion of that “lost” $100 directly to the purchaser.

PARIBUS’s objective is to capitalize on the emerging trend of consumers making a greater proportion of their purchases online. As PARIBUS says it, “Stores owe you money; We’re gonna get it for you.”  [3]

BUSINESS MODEL

Value Creation

PARIBUS has successfully implemented and leveraged five of the value creation levers: Focus, Efficiency, Differentiation, Scale, and Network Effects.

  • Focus & Differentiation: PARIBUS has distinguished itself in the marketplace by employing rigorous algorithmic models that measures the frequency and magnitude of price movements across product types at some of the largest Internet retailers in the United States.
  • Scale: During a phone interview with Co-founder Eric Glyman, he said, “What I can say is that we are already saving our consumers millions per year, are already tracking hundreds of millions in annual purchases, and have increased our size from several hundred in May to a number more than 100x larger within 6 months.” The more retailers that partner with PARIBUS inherently increases the number of opportunities that PARIBUS has to grant its consumers instantaneous discount savings.
  • Efficiency: PARIBUS offers consumers a no hassle, easy-step, one-time signup opportunity. Thereafter, the efficiency of the service is self-evident. Namely, PARIBUS (1) automatically filters through individual’s online purchases via their email account; (2) scavenges the retailers’ websites to detect instantaneous discount postings (i.e., price reductions); (3) automatically processes the discount rebate form on behalf of the consumer; and (4) directly deposits a significant percentage of that discount into the PARIBUS user’s account.
  • Network Effects: PARIBUS is already supported by a number of large, well-recognized firms. The array of available merchants affords consumers the opportunity to leverage the PARIBUS service across an interrelated network of stores that their current consumer base already spends a significant portion of its disposable income.

After speaking with other PARIBUS employees, it’s clear that the elements of the value creation proposition they feel will be most attractive to customers are: a) (i) functional (Has this service performed its job as I expected?); (ii) economical (Have I saved money because of it?); and (iii) social (Does this service generate networks within and/or across consumers and retailers?).

Value Capture & Sharing

PARIBUS’ pricing model is simple.

  • PARIBUS retains 25% of the total discount rebate they are retrieved from a consumer’s purchase
  • PARIBUS also engages in a form of outcome-based pricing: If PARIBUS user A has non-PARIBUS user B, PARIBUS will reduce the the % margin that they retain from PARIBUS user A for each discount rebate retrieved

OPERATING MODEL 

The operating model is broken down into three components:

  • Structure:  PARIBUS is an automated plugin “which connects to users’ email, scans their online purchase receipts, and files price adjustments claims.”  Users can sign up via their mailbox, which “works with most email providers” (e.g., Gmail, Outlook, etc.), and the “plugin allows them to claim money back from various retailers.  PARIBUS price matches “20 etailers including Amazon, Best Buy,Walmart, Target, and Macy’s.” [5] In terms of organization, Co-founder Gylman describes it as centralized and non-hierarchical, wherein each member of the team–be it the Co-founders, front- and back-end developers, marketing director, etc.–are all encouraged to voice their innovative ideas.  This core team operates out of a small office building in Brooklyn, NY.  The decentralized portion of their organization lies in various countries overseas, where it is easier to source low-cost data storage and analytics projects
  • Processes: Because PARIBUS does not yet produce physical goods, their reliance on external manufacturers is minimal. And given that only a small fraction of their organization is decentralized from their Brooklyn hub, supply chain management has yet to pose any serious cost-related challenges. The key process-related advantage centers around innovation: helping users attract the best deals after their purchases. “Instead of acting as a search engine through which users can find best prices, or provide users with coupons, [PARIBUS] backtracks all of their users purchases. The process-related secret sauce, if you will, is that PARIBUS uses the same retailer software approaches that produce variable price changes at the stores.  Lastly, on the service front, PARIBUS is quite “behind-the-scenes”–think about us, says Co-founder Glyman, as “the housekeeper who cleans your room while you’re out and leaves your lost dollar bill on your counter for when you return.”
  • Assets & Capabilities: As discussed above, PARIBUS relies on sophisticated data and security tools. On the data front, co-investor Jenny Xia (who was also kind enough to let me interview her) describes PARIBUS’s three-pronged IP protection safeguards: “First, we have a “web scraper” that quickly analyzes data to determine requisite rebate eligibility, depending on the time of purchase and store location. Second, we use a “natural language processor” that interprets the various jargon used by different rebate forms and identifies which phrases functionally hold the same meaning.”  On the security front, PARIBUS faced initial pushback from consumers against allowing PARIBUS to access their email accounts. In response, PARIBUS incorporated cutting-edge security systems into their plug-in, and the firm also consulted with highly reputable security experts who advised the team on how to limit the scope of PARIBUS’s access to only information directly pertaining to the online purchase.

ALIGNMENT

Ultimately, PARIBUS has aligned its business and operating models to capitalize upon the ubiquitous price manipulations affecting online purchases, which “are a seemingly everyday occurrence” in the “rise of the digital age.” [6]

Paribus has leveraged the constantly changing prices at online retail stores to established a fixed discount-sharing system that benefits both the firm and its consumers. The inherent benefit of cost savings, coupled with the outcomes-based referral program (described above) bolsters key elements of their value creation levels–namely, scale and differentiation. For example, the referral program benefits enable them to enhance user-relate scale volumes, and their first-to-market automatic discount capture pricing scheme differentiates them from any existing competition.

Additionally, PARIBUS has leveraged its IP technologies, innovative product, and centralized, tight-knit organizational structure to shield itself from potential competition who might otherwise try to undercut PARIBUS’s value creation by stealing its user base scale share or by merely reducing it’s 25% rebate-sharing value capture model.  And perhaps what’s most ingenious of all about the firm’s alignment is that PARIBUS’s value-add features and “post-purchase savings” approach differentiates the organization “from other players who aim to save consumers money on their purchases.”  Put simply, PARIBUS “uses the very same advanced data structures and algorithms that retailers use to distort prices.” [8] Whereas PARIBUS, one the other hand, aims to be the digital champion of consumers–like us–who lack the time or will-power to discover discounts before pushing the “BUY” button.

Works Cited

[1] http://trendwatching.com/trends/5-trends-for-2016/

[2] Most major online retailers legally guarantee consumers that they are eligible for many discount-related savings that occur after the initial purchase date.

[3] https://paribus.co/

[4] https://paribus.co/

[5] http://trendwatching.com/trends/15-innovations-from-2015/

[6] http://www.investopedia.com/articles/investing/103015/how-does-paribus-work-and-make-money.asp[6]

[7] http://www.investopedia.com/articles/investing/103015/how-does-paribus-work-and-make-money.as7

[8]  http://www.investopedia.com/articles/investing/103015/how-does-paribus-work-and-make-money.asp

Other References 

[A] http://abcnews.go.com/GMA/video/holiday-shopping-bills-empty-bank-account-35409734

[B] http://abcnews.go.com/WNT/video/tips-biggest-thanksgiving-shopping-bargains-35422901

6 thoughts on “PARIBUS — reclaiming $$$ that stores owe YOU.

  1. Wow Mike! Terrific breakdown of the business and operating models at Paribus.

    1) Do you feel that etailers will change their way of doing business in response to this service if it becomes widely used? For example, would we see price changes occur less frequently because Paribus returns the value of the change from the business to the consumer?

    2) Could Paribus extend themselves beyond the readjustment rebate claims? If so, to where?

  2. Really interesting, thanks Mike!

    Similar to #2 in the question above, I’m curious where Paribus might go next and how that might impact its core business. They seem to have invaluable access to customer buying behavior across multiple stores and platforms. I’d imagine there are several opportunities to start leveraging or selling this data that could lead to significant new revenue streams. While I’d think this would be tempting, I’m wondering how this might impact users thoughts around privacy and security and what rights they already require users to give up upon sign-up.

  3. Hi Mike, this was a great write-up of a very interesting business model. I won’t repeat any of the former questions, but I was wondering what advantages you feel Paribus has that potential competitors don’t (beyond being a first mover)? What does the company actually do in day-to-day operations and how are they evolving their product?

  4. Mike,

    Love the structure you used to assess the business and operating models as well as the diagram that explains it.

    My question for PARIBUS is how are they delivering value to the retailers? I see this as a multi-sided platform that has clear benefits for one side (the end customers like you and me), but I’m curious how they got big retailers to sign on. If PARIBUS doesn’t create value for the retailers too, I expect that retailers might even actively try to shut PARIBUS down.

    Steph

  5. This seems like a great business model. It truly captures value to the consumer. To Steph’s point above, I don’t think the retailers actually sign on to the platform, Paribus is the one negotiating and managing the rebate process with each retailer on behalf of the customer. As Paribus grows, I worry that the retailers will change their policy to exclude rebates requested by a third party. One way Paribus could may be prevent this is by proactively reaching out to the retailers and share some of the benefit back to the retailer by issuing the rebates in store gift cards rather than cash deposits. Additionally, I think this would have been a wonderful idea for a charitable organization, with both the retailer and customer receiving a donation receipt (and therefore tax benefits) for the rebate.

  6. Great write-up, Mike! Fascinating model. It seems like there’s some uncertainty associated with the value that they’re providing to consumers and that their model relies heavily on trust – trust that Paribus is not reading your emails and trust that Paribus’ algorithms will deliver you the best discounts. How do they build that trust with consumers? Do they have a more intensive on boarding process to build that consumer base or have consumers been easy to engage?

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