The group buying industry has unveiled its first code of conduct, following a series of complaints by businesses and consumers over the practices of certain operators.
The code, drawn up jointly by the Australian Direct Marketing Association (ADMA) and the Australian Interactive Media Industry Association (AIMIA), has been signed by eight of the major industry players – Cudo, Groupon, Jump On It, LivingSocial, Ouffer, Spreets, OurDeal and Scoopon.
The idea for a code was first mooted earlier this year. Since then, the group buying sector has been dogged by negative media stories over unfulfilled deals, spurious advertising and complaints from merchants that they were misled as to the benefits of daily deals.
In what appears to be a move to head off the negative publicity, the voluntary code requires that members adhere to competition and consumer legislation, promote “fair, honest, ethical best practice” and increase consumer confidence in group buying.
Best practice is defined as clearly describing to subscribers the benefits of an offer before accepting it and ensuring that marketing is accurate.
The industry hopes the code will boost confidence in group buying. Many start-ups have expressed reservations about the sector, despite its enormous growth in Australia – it is forecast to have revenue of $400 million in 2011.
ADMA will set up a member-funding tribunal to investigate complaints, with the threat of expulsion from the code if a company is found to be in breach.
Billy Tucker, CEO of Cudo, tells StartupSmart that the panel won’t be afraid to censure the members that provides its funding.
“The code is black and white – if you break it, you break it,” he says. “Other group buying businesses want to know that ADMA will act. We’d love for the vast majority of the 70 group buying sites to sign up, but we have started with those that account for 80% of industry revenue, so that’s a good start.”
“There are still shonky start-up operators in this space and I wouldn’t say that everyone on board now has always behaved in the best interests of consumers and merchants.”
“Consumers expect a catch and with margins screwed down to zero, the businesses feel they have no option but to cut the service. It’s down to the group buying sites to find the right merchants – we rejected 1,200 last month because they weren’t suitable.”
“More than 70% of merchants that have run a deal with us say they would do it again. There is a lot of unsold inventory out there, but merchants need to go into group buying with their eyes open.”
John Butterworth, CEO, Australian Interactive and Media Association adds: “Australian consumers are clearly enthusiastic about group buying deals.
“As a comparatively new industry it’s essential that we move as quickly as possible to implement measures that make group buying a rewarding and successful experience for consumers, merchants and group buying platforms alike.”
“The code has been developed by the industry associations to help establish group buying as a mainstream channel.”