Group buying industry amends code to crack down on compliance and complaints

An industry code developed to regulate the group buying sector has been tightened, with additions including more clearly defined refund conditions and specifications over how many vouchers are sold in an individual deal.

The voluntary code has been developed by the Association for Data-Driven Marketing and Advertising, but has support from consumer affairs groups across the country.

The new code includes the following provisions:

  • Spot checks to ensure group buying company compliance.
  • Requirements for more detailed terms and conditions (no more surprises for consumers).
  • Tighter controls over how many vouchers are sold – helping ensure merchants understand and can meet their obligations.
  • Clear and unambiguous refund policies which must be readily accessible with each offer.
  • Improved complaints handling with defined response times for queries and complaints (one business day) to reduce consumer frustration.
  • Defined complaint resolution time frames set at 10 working days — unless there is a reasonable expectation the process will take longer — but no more than 30 days.

The Code Authority can also ensure a signatory group buying business issues a formal apology to a consumer, recommend a refund for a consumer and seek a written undertaking the breach will not be repeated, should a breach of the code occur.

Scoopon executive general manager Jared Baker told SmartCompany the company is fully supportive of the changes.

“We’ve signed up for it and actually helped create it initially. The drive to improve the code has been at the front of our minds throughout 2010 and 2011.”

“It’s been influenced by things that went wrong in the early days to do with capacity and the number of vouchers being sold to consumers,” he says.

Other signatories to the code include Cudo, Groupon, LivingSocial, OurDeal, Deals.com.au and Ouffer, all of which make up the major players in the local industry.

Telsyte research indicates the group buying industry has grown rapidly since it began in 2010 and now generates approximately $500 million a year.

Senior research manager with Telsyte, Sam Yip, told SmartCompany the group buying industry quickly went from a concept to a “full blown market”, but the number of businesses in the sector has started to fall.

“Currently there is lots of industry consolidation going on, lots of small sites have closing down and many of the remaining smaller sites are looking into being bought by the larger sites,” he says.

Baker says the number of group buying sites in the past year dropped from about 85 to 30.

“There are only 15 sites remaining that make $1 million plus in revenue a year. It’s clear those which don’t look after customers are fading out,” he says.

Baker says a tightening of the code was needed because of the rapid growth the industry experienced in its early days.

“In the early days of group buying the growth was so phenomenal that businesses struggled to keep pace with the number of people who were buying the deals. We now have capacity calculations in place and sites have learnt to know what their business can cope with.

“Consumers, merchants and group buying sites have learnt a lot since 2010,” he says.

Baker says the number of complaints compared to over all purchases when Scoopon first began operating in 2010 was only 4-5% and this has since dropped to 2% since they tightened their own practices in 2011.

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