Group buying sites create code of conduct, pledge to provide SME merchants with clear payment terms

Two of the biggest group buying sites in the country have teamed up to form an industry code of conduct they say will protect both customers and merchants, pledging to respect privacy, display honest advertising and provide clear payment terms to SMEs.

Cudo, which is run by Ninemsn and Microsoft, has teamed up with Spreets, run by Yahoo!7, to launch the new code of conduct.

The move comes as speculation continues to grow over the future of the group buying industry, especially after Groupon announced its float two weeks ago. While revenue among Australian group buying sites has exploded, questions have been raised about whether merchants will be attracted to these sites in the long-term.

Last month some merchants told SmartCompany they did not receive the experience they originally thought a group buying deal would offer, and mistakenly believed it would bring them extra revenue when in fact they made losses of several thousand dollars.

Cudo chief executive Billy Tucker says it is “extremely important” for merchants to have a great experience, saying this is essential if the industry wants to survive in the long-term.

“Each business has a different reason to do a group buying campaign, but if they don’t have a low marginal cost of sale and if they don’t have capacity for growth then they shouldn’t be touching it. If a merchant doesn’t cope, we have the promise to pick up the pieces.”

“It’s up to us to manage something if it goes wrong.”

The code lays out pledges to merchants, saying companies will help SMEs package and price the right deals, manage the increase in demand by capping an offer as necessary and help bring back customers after the deal has ended.

Deals.com.au co-founder Adam Schwab says some group buying and deals sites haven’t treated merchants as well as they could have.

“It’s very easy to contract a deal that sells a lot of deals but that might not work for the business… There’s always a relationship between making sure the deal works so the customers come back, but also is good enough to make them want to buy it in the first place,” he says.

The code of conduct lists out a number of principles for group buying sites to follow, saying they must always offer great deals, make website terms clear, respect privacy and provide responsible and helpful customer service.

It also points out that companies must never engage in “misleading advertising… such as advertising specific discounts or products that don’t actually exist”.

Such a situation occurred earlier this year when Tucker accused Groupon Australia of advertising products in web ads that were not available to customers.

Both Groupon Australia, trading under the StarDeals brand, and Scoopon were not involved in yesterday’s announcement. Both were contacted this morning but were unavailable for comment.

“We made a decision about this only two weeks ago. We had a framework for a code of conduct in place with some draft terms, but we thought we needed to partner with one group buying business so we can get support from the media groups,” Tucker says.

“It’s not credible if you’re creating a code of conduct by yourself.”

The code also pledges that group buying sites will help merchants deal with an increase in customers – something merchants have said can be particularly hard to handle, especially when they are operating at a loss.

Spreets chief executive Dean McEvoy has said group buying companies “have a responsibility to provide merchants and members a level of confidence around their group buying experience”.

The code has been welcomed by media groups.

ADMA chief executive-elect Jodie Sangster has said the association supports the industry “taking a proactive step towards responsible marketing”.

“We are looking forward to assisting them to ensure best practices, adopted by marketers Australia-wide, are embodied in their industry standard.”

Telsyte senior research manager Sam Yip also said in a statement the firm supports the code, adding it is a “positive first step to create a sustainable and valuable industry”.