When Group Deal Sites Go Bad

Deal of the day and group deal sites offer the potential for big discounts. But what happens when they can’t meet those promises?

That challenge occurred for group deal site Cudo, which we profiled back in September, earlier this week. Group deal sites offer discounts on a product or service, but only if a certain number of people sign up. (That minimum number means that the business involved, which will pay a listing fee, can be relatively confident it will make a profit on the product.)

Cudo had been promoting a discount cupcakes deal in Sydney but found itself overwhelmed with orders. As well as offering a refund, Cudo CEO Billy Tucker emailed the affected customers. Here’s what he wrote:

My name is Billy Tucker and I am the CEO of Cudo. I am writing to you regarding your recent purchase of cupcakes from Ghermez Cupcakes on October 19, 2010.

At Cudo, your total satisfaction is everything to us. We select the best businesses in Australia to partner with, who provide amazing offers in return. However, as we received such a phenomenal response to this offer it is proving to be problematic to meet the demand from consumers without compromising quality and standards.

To ensure every Cudo experience is always a faultless one, on this occasion, I have come to the decision to unwind the offer and, instead, refund in full every one of the members who purchased but have yet to receive their cupcakes.

We would like to apologise for the inconvenience and disappointment this may cause, and would like to assure you that offering great quality is as important to us as offering a great bargain.

I’ve got no argument with quality, but if you can set up a system which counts the number of orders, you should also be able to set up a system that stops accepting orders when it becomes clear they can’t be fulfilled. Being sold out is not an unusual situation, after all.

Earlier this year, we speculated over whether the Australian market was big enough to sustain so many online deal sites. For sites offering a single product until it sells out, the challenge is to come up with a sufficient variety of deals to be profitable. For group deal sites like Cudo which don’t let an offer kick in until a certain number of people sign up, the first challenge would seem to be getting enough people interested. However, the cupcake example shows that they can also come up with deals that are simply too popular, and that they need better systems.

A sense of perspective is needed on this. Yes, businesses should deliver on their promises and it is annoying when they don’t, but not getting cheap cupcakes is not the end of the world. There are many other cupcake sellers around, and many other group deal sellers (such as JumpOnIt, OurDeal and Ouffer.com). As with so many areas, the best way to respond to a business that treats you badly is not to use them again.

Lifehacker’s weekly Loaded column looks at better ways to manage (and stop worrying about) your money.