“Gouged”: Angry retailers threaten ACCC complaints over Neto price hikes

Neto

Business owners who built e-commerce websites through platform provider Neto claim they’re being “gouged” by a sudden change in its pricing structure that will leave them thousands of dollars a year worse off.

Neto — a software service provider for e-commerce websites — has gone cap in hand to customers to stem “significant losses” and will introduce a new model where businesses are billed based on annual turnover.

The Australian company also informed clients it will shift the burden of a weak Australian Dollar by charging in US Dollars, effective April 1.

Daniel Kofoed, owner of Golfers HQ, says his monthly bill will increase by 218% from $88 a month to US$199 ($280), not including currency conversion costs.

“As a small business owner, it’s just not something I can absorb,” Kofoed, who has been a Neto client for six years, tells SmartCompany.

“An increase in costs in an ever-competitive market where customers are demanding lower pricing is discouraging your average small-business owner from going into business,” he says.

“It’s price gouging their loyal Aussie clients.”

Kofoed, as well as two other business owners SmartCompany has spoken to, say they intend to write letters to make price gouging complaints to the ACCC over the price hike.

SmartCompany spoke to two other separate Neto clients who requested to remain anonymous for fear of commercial reprisal.

One multimillion-dollar online retailer said their monthly plan could increase from under $500 a month to over $1,500 after the changes.

“It punishes people, you should be paying for features, not according to how well you are doing,” the business owner says.

Neto has applied a discount to customers which caps monthly increases at $360, this means the actual increase will be lower, at least initially.

Neto chief executive Ryan Murtagh said the discount will last for a minimum of 12 months, adding there are “no plans” to remove the discount “at this stage”.

The price hikes have created a fissure in the Australian e-commerce community, with many taking to social media, review websites and Neto feedback forums to express anger.

However, others SmartCompany has spoken to say they believe the increase is broadly justified.

Edible Blooms owner Kelly Jamieson has defended the vendor, saying its services still represent good value.

“In many ways, they’ve been undercharging for what they’ve been offering,” Jamieson says.

Jamieson will pay more under the changes but did not want to go into specifics when asked.

“We certainly feel the new fee represents value for our business, and we’ve certainly seen, particularly in the last little while, great improvement in service,” she says.

“We have to balance our costs”

In an email sent to Neto clients on February 28, seen by SmartCompany, Neto chief executive Ryan Murtagh said the business needed the extra money.

“We have to balance our current costs while investing in our future,” he said.

Murtagh separately told Kofoed over social media that Neto, which is majority-owned by Telstra, could “no longer endure significant losses” associated with its legacy pricing model.

Three separate clients said they weren’t consulted about the change prior to the February 28 email informing them of the restructuring.

However, the company has been considering the move for several months.

Select clients were informed and asked for feedback on the prospective changes earlier this year, while clients informed last week have just a month to prepare for the hike if they are billed monthly.

Asked whether Telstra pressured Neto into changing its pricing structure, Murtagh said the telecommunications giant holds various board positions as the majority owner of the business and is “party to all decisions the company makes”.

Neto walks back part of change

Under the changes, Neto will migrate all its merchants onto new plans, which are defined by so-called “revenue bands”, determined based on revenue earned over the last 12 months.

The bands, detailed on its website, range from US$79 a month to US$499 a month.

The first band, for clients with annual revenue up to $50,000, starts at US$79 a month, moving to US$199 a month for firms with turnover up to $250,000, US$249 a month at $750,000 in revenue, and US$499 monthly for those up to $1 million.

Additionally, clients will pay an extra $150 per month for every $250,000 in annual turnover above the $1 million threshold.

Neto says it will upgrade clients to larger plans automatically when their revenue passes one of the thresholds, recalculated monthly.

In a statement, Murtagh said Neto would be “doing a disservice to the entire community” if it didn’t “properly manage” its business by changing its model.

While everyone SmartCompany spoke to expects an increase, Murtgah says about 20% of clients will experience a decrease in fees.

In return for the price hike, Neto says it will “include greater value with features such as unlimited products, warehouses and users” in the plans.

But clients who will be forced onto “large” plans have criticised the new structure for throwing in features they don’t need, with the primary addition being more sales channels.

However, just hours after SmartCompany sent a series of questions to Neto on Monday, the business sent a new email to clients revising some of the changes.

In this second email, sent on Monday afternoon, Murtagh said the “medium plan” threshold will increase from the original US$100,000 in annual turnover annually to US$250,000.

The medium plan is US$50 cheaper than the large plan at US$199 a month.

“After speaking to many Neto merchants, we realised that the revenue band for our medium plan was too small, causing them to be migrated to large plans without requiring all the features that came with it,” Murtagh said.

An expensive proposition

Several clients reported being in a difficult position where they no longer viewed Neto as affordable but face high costs associated with migrating to a new provider.

“[Moving] would great a lot of headaches,” one business owner said. “It’s a massive cost.”

“That’s what they’re banking on, people being so invested in the platform that changing is not an option.”

Kofoed agrees, saying he will be forced to move but will have to take on a second job to afford a switch.

“It’s fantastic they’ve got long-term goals, but why I as a business owner should have to fund their grand plan to expand into America is unfathomable,” he says.

Still value for money?

Jon Burrell, general manager of national camping chain Tentworld, says his costs will double under the changes but maintains Neto is still “extremely competitive” with other providers.

Tentworld booked $42.8 million in revenue for 2017-18, an increase of 114.7%, meaning it is in store for a significant fee under Neto’s new model.

“At first, I admittedly was quite angry about this,” Burrell tells SmartCompany.

“However, we had not experienced a price change since we signed up, over five years ago.

“Our revenue, as you are aware, has increased dramatically since then, so our reduced cost of operation … has been great for us,” he says.

“While I do not really agree with how they’ve managed these changes — I think more notice, and more gradual would have bee appropriate — I can see that they’re playing a bit of catchup.”

Jamieson says there are pros and cons to all software solutions, and while she says she’d prefer an Australian business to charge in Australian dollars, a revenue-based pricing model is not uncommon in the industry.

“A lot of e-commerce platforms charge per transaction … technically this does make it fairer for everyone — if you’re doing well you pay more,” she says.

Some merchants remain concerned the currency changes will result in extra conversion fees, particularly if paying bills via credit card.

Murtagh defended the switch by saying it’s the market standard to charge in USD.

“Billing in USD is becoming a standard currency in SaaS globally. You will find that leading Australian technology companies such as Canva, Atlassian and Buildkite all bill in USD. The same is true for many major Neto competitors,” Murtagh said.

Clarification: This article was updated at 1.28pm AEDT March 5 to clarify details of a discount Neto will apply for existing customers capping fee increases at $360 per month for at least 12 months.

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Neto-user
Neto-user
1 year ago

Our price has more than doubled. Its been handled extremely poorly by Neto. Its a disservice to them. Their loving Neto fans are livid; what a quick way to flip your loyal fans on its head! Even their google ratings drop from 5 stars to 3 stars. It could have been handled completely differently, so this shows their inexperience in business around price increases. Sure, the price might be right, but you can’t double or triple prices over night.

Many business now are scrambling to find alternatives, that’s what savvy business owners will do.

They will double/triple revenue over night…. and I hope they don’t lose half their clients and this quick cash grab sends them broke…

Troy
Troy
1 year ago

I had over a 600% price rise under the new pricing. It’s a no brainer for me to leave and I have already started migrating to a new provider. Many of the new included options are totally useless to my business and NETO’s answer to me was a canned Email that basically said “like it or lump it”

Don't burst my bubble
Don't burst my bubble
1 year ago
Reply to  Troy

Hi Troy.. can I ask who you’re migrating to, as I also want to move now.. thanks.

Wayne
Wayne
1 year ago

As little as four weeks ago they were telling existing customers they had “no plans” to change existing customers to USD billing so don’t have a lot of faith that the increase cap will stay in place long.

Keara
Keara
1 year ago
Reply to  Wayne

Exactly this. When I brought this up on the phone I was told “well… that was true at the time… it was in the pipeline for later… they must’ve just brought that forward.”

The email saying ‘no changes to existing plans’ was Feb 6. The emails notification of changes to existing plans came through on Feb 28. It didn’t take them very long to change their minds.

Further to this – the emails coming out suggesting we review our add-ons as these might be what is costing us – they’ve also shuffled which add-ons are included in which packages. We’ve always used Low Stock Notifications as part of smaller plans and will now be forced on to the Large plan for this feature.

NetoUser (but wont be anymore)
NetoUser (but wont be anymore)
1 year ago

We specifically moved to Neto from Shopify and explained to them the decision for the move was to avoid monthly commission based fee structure. Their staff agreed and stated that they DID NOT have a commission/revenue band structure, nor did they disclose any plans for such a thing.

Our store development has taken double the quoted time, which has cost many months of subscription fees and before we have even launched our store we get told that we will be up for a 100% price hike.

Unacceptable.

Betrayed
Betrayed
1 year ago

Here is where thew betrayal began that not many are reporting. Neto exploded in popularity after Bigcommerce did exactly the same things a few years back. Neto was a small company and happily absorbed all of the customers who left Bigcommerce. We were ALL told such a betrayal will not happen at Neto. They doubled and doubled again solely from pick up disgruntled customers. It is clear they master planned this. Start off small, absorb customers with promises to stay local, caring different from the other sell outs, then follow others in the great sell out for profits alone not considering the business was built on taking customers who felt betrayed by other platforms. The move to AWS was the first alarm bell with people told it was because the service expansion was needed. Then the slow migration with a shock announcement to merchants giving them less that 30 days to accept the rip off plans or move to another service provider. Also, they used clients revenue figures to set pricing and posted their intention on non secure emails to each customer. Well done Neto! You just disclosed every merchants income over non secure emails. Betrayal nothing less, lies and deception and fake narratives. Face it, you grew a big head, got greedy and don’t care about Aussies. The USA is your big move. Good luck.

Dano
Dano
1 year ago
Reply to  Betrayed

Im in the US. Wow! do they really think the USA will embrace a company that treats their legacy customers that way. Next thing you know, Telstra will bill customers in US dollars. Shows how willing they are to lose a few Aussie customers to gain a new market.

Kicked in the Netos
Kicked in the Netos
1 year ago

Please check your facts. The contention that monthly increases will be capped at $360 is either a lie or very, very disingenuous. My plan was increased by AUD$360 after the AUD to USD conversion took place. The conversion caused my plan to go up by AUD$206 then a further AUD$360 was added to the plan by revenue banding. Total increase AUD$566. I know of many users where the increase was well over $360 per month.

Cisco Sara
1 year ago

Hi, I work at Neto and would like to clear up the confusion here around the pricing cap.

The AUD$360 cap we introduced as part of the pricing change applies to all customers and prevents an increase of more than AUD$360 between your old plan price and your new plan price, converted back into AUD, so the most you will pay between your old AUD plan and your new USD plan is AUD$360.

Please note that the cap applies per store, so if you have multiple stores with us, each of their plans will be limited to an increase of AUD$360. Please feel free to contact me on [email protected] to discuss this further.

Kicked in the Netos
Kicked in the Netos
1 year ago
Reply to  Cisco Sara

Thanks Cisco.
Can you please advise if this change was made subsequent to the March 1 email from “Ryan at Neto” with the subject line “Changes to your Neto Plan”? Because the email sent to me on March 1 clearly shows an increase from AUD$499 to USD$754 (after a discount of USD$45 was applied).The difference between AUD$499 and USD$754 on today’s rates is AUD$572. Further I did not see any later emails contradicting the first email. Maybe you offered the discount to customers on a case by case basis? But in this article Neto seems to be saying that no plan was ever increased by over AUD$360 per month. But mine certainly was.

Naomi
Naomi
1 year ago
Reply to  Cisco Sara

Cisco, I’ve received just one email from NETOP regarding the changes and not one mention of the pricing cap of $360 AUD. Was this information provided to all account holders or is NETO holding out till they change their mind again?

Neto-user
Neto-user
1 year ago
Reply to  Cisco Sara

Capped, but Neto can give just 30days notice to scrap that.

Neto-user
Neto-user
1 year ago
Reply to  Cisco Sara

Readers be aware, customers aren’t capped at paying $360, that’s just the capped increase. So customers have billing gone from $350 to $710aud overnight.

Formerly a Neto user
Formerly a Neto user
1 year ago

Neto…the Photobucket debacle of 2019!

Pete
Pete
1 year ago

They cant seriously think that one persons turn over = another persons profit. My store turn over is in the large bracket but its wholesale profit margins 15-20%, of course the lady from edible blooms with similar or higher turn over and 70-90% margins doesn’t see the increase the same way I do. Being a neto partner I saw the prices earlier than most and was told up until two weeks ago that there were no plans to force anyone onto the new plans. It’s all been handled very poorly, and they will lose not only clients, but the respect and the good will that Ryan has built has gone, it will take years to get it back if he ever does. But I guess he already made his money.

Pete
Pete
1 year ago
Reply to  Pete

I should also add, if I get a service that gives me 1,000 products and I am using 300 dont tell me how much more I am getting now with unlimited products, I still had 700 products to add on the plan I liked. Like I told my neto script reader, all you can eat still is only the amount that you can eat. She said feel free to find a more suitable product there are other out there that may be more suitable to you.

Its not like neto is a patform without issues, they still cant handle back orders properly for products that you may want to discontinue when they run out. A simple thing like Sendle not allowing a client to choose the cheapest option when they have also decided they want tracking, then neto auto bills you the higher freight fee. A couple of simple problems that appear to be too hard to handle.

Ed Shyed
Ed Shyed
1 year ago

Vote with your feet (and wallets)

if this mob want to be amercian, let them move to america, and use alternatives instead

Don't burst my bubble
Don't burst my bubble
1 year ago

I’ve just come on board with Neto in the last month.. and I am pissed that these changes have occurred. I hadn’t budgeted for these prices. I am an Australian business doing business with an Australian business, why am i being billed in USD??!!! these changes have increased my monthly spend by over 80%, they’ve tried to compensate me with extra features.. however I have no use for any of these features.. very very very dissapointed would never recommend or use them again..

Don't burst my bubble
Don't burst my bubble
1 year ago

I’ve just come on board with Neto in the last month.. and I am so angry that these changes have occurred. I hadn’t budgeted for these prices. I
am an Australian business doing business with an Australian business,
why am i being billed in USD??!!! these changes have increased my
monthly spend by over 80%, they’ve tried to compensate me with extra
features.. however I have no use for any of these features.. very very
very dissapointed would never recommend or use them again..

Gary
Gary
1 year ago

We are seeing our costs go from AUD119 to a discounted AUD479. On their new model without discounts, within a year we would be looking at $1,527 a month.

A turnover model is absurd. It would be different if they had a model based on number of orders per day or some other way that bears a relationship to their effort.

They are offering “free” upgrades on no of users, analytics, inventory, shipping and so on.

We have been using Dear Systems inventory for years. Have taken a look at Neto but by comparison it’s rubbish. We can’t even get a inventory user guide of any worth.

Their shipping module is a label printing system.

I have not tried their analytics as they have not offered a trial period.

We have suffered with bugs for years while Neto has focused on new markets like Amazon.

So why one might ask do we need to stay with them? Fact is they have us by the short and curlys. Neto know very well that to change would take a substantial financial effort but more so we fear a collapse in our SEO positioning which will have a direct revenue impact.

This action by Neto is not just price gouging. It is tantamount to a form of blackmail as they know that the practicality of changing to an alternate vendor looks very grim.

Is there any mechanism in Australia to protect us from this extortion?

DavidFilmart
1 year ago

Another business being ruined by Telstra’s remote upper management. Could not Telstra out in the work to just run its own business right first, then start buying up others?

Jonathon
Jonathon
1 year ago

Yeah, I have been nothing but disappointed with Neto, since I changed to them. Even at the lower price, their service is terrible and most of the features they add have so many bugs, that they never seem to fix. Support tickets rarely get resolved properly, I point out bugs in their system and they have taken years to fix them.
Now they want to charge us more for their rubbish system. I have other websites on other system like Bigcommerce which work better, have better support and more flexibilty. I think I will have to change systems before they go under.