The group buying industry has launched a code of conduct it says will help eradicate unclear advertising and reduce the number of complaints as the sector booms and starts moving into new channels and niches.
The move comes about 18 months after the sector first took off in Australia, with the industry now expected to turn over $400 million this year alone. But it has been rife with complaints, with customers complaining of unclear advertising and deals not being fulfilled by their vendors.
The code was launched by the Australian Direct Marketing Association in conjunction with the Australian Interactive Media Industry Association, which have joined with the major group buying sellers including Groupon, LivingSocial, Scoopon, Spreets, OurDeal and Cudo.
“These companies really do want to take a proactive step to make sure there are some industry standards, and that consumers feel they can have some confidence,” says ADMA chief executive Jodie Sangster.
The move to create a code of conduct was signalled earlier this year, although at that time not every major player was on board. That announcement came just a few weeks after SmartCompany published an article featuring merchants who felt they were being treated unfairly.
The new code states that group buying companies must make all communication clear so customers fully understand what they are buying, ensure all appropriate policies and procedures are in place, and make sure that all electronic messages comply with relevant legislation.
“In addition to the code, signatories are taking additional steps to reinforce with merchants their obligations under the law,” the ADMA said in a statement.
Sangster says there are a number of key issues addressed in the code, but points out many of these areas are covered under legislation.
“The main issues are really about advertising to make sure products are marketed correctly, the terms and conditions are clear, and that expectations are that when users buy a coupon, they don’t feel like they’re getting ripped off.”
While group buying has taken off, and the majority of merchants say they are happy to run a deal with one of the big sites again, there are still complaints. Some companies said it wasn’t explained to them that group buying is more of a marketing investment, and less of a direct revenue source – many businesses discount products above 50%.
Earlier this year, group buying businesses made steps to ensure companies understood they were embarking on more of an advertising venture.
Additionally, some customers have complained that offers aren’t being redeemed by merchants, and have also pointed out some deals aren’t being advertised properly. Groupon was targeted several weeks ago when it offered an iPad 2 deal, although customers said the advertising was ambiguous – it took steps to rectify the appropriate email message.
Sangster says the code is a testament to the strength of the industry and its potential longevity.
“Consumers love a bargain, and they love getting value for group buying. Over time, we’re going to see this model evolve as it moves into specific areas like travel. So this code will allow companies that are already doing the right thing to continue to do so.”
Complaints under the code will be sent to the ADMA. If they cannot be resolved with the company, it will be taken up by the association and as a last resort, a company could be asked to remove itself from the code and any association with ADMA.
“We’ve get a big role, we’ve got to make sure that everyone is doing the right thing. A big role for us will be complaints handling.”
Groupon Australia managing director Patrick Schmidt said in a statement the company was fully supportive of the code, along with LivingSocial local chief Colin Fabig, Cudo chief Billy Tucker and Spreets founder and chief Den McEvoy.
Scoopon general manager Jodie Auster pledged the company’s commitment, while OurDeal chief Julian Holman said companies need to abide by the code in order to continue their strong growth.
“It sends a loud signal to consumers and merchants that this is a mature and responsible industry that exists to serve the greater good of Australia’s retail sector and Australian consumers,” he said.
Ouffer chief Simon Robinson also pledged his company’s support.
Sangster says the code is voluntary and states that while she believes there isn’t a need for legislation, it will be crucial that companies abide by it.
“This is a self-regulatory code, so we will try and solve the problem where possible, when one occurs. I don’t think there is a need for legislation, as most of the content is covered by existing laws. But it is an important step for the industry.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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