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.


Comments

    I had a similar thing happen with Scoopon earlier in the year. I bought a holiday voucher for a resort up in Queensland, only to have them turn around and pull the deal because one of their suppliers couldn't handle the demand (they offered breakfast and one complimentary bottle of champagne per voucher etc, probably through a third-party). Was hugely disappointed, as was looking forward to a holiday away with the missus. At least I got a full refund. Why offer a deal if you can't follow through? Surely these sites can have a minimum AND maximum boundary for offers?

    It seems to me that it's the supplier business that has over-esimated their capacity (or under-estimated demand), rather than Cudo or Scoopon being unable to count the number of orders.

    Sounds like a good buisness model.. take a ton of orders more than accountable, let the money from the orders sit in your bank 1-2 weeks, collect the interest then claim it unfulfillable and refund the money.

    Its pretty clear cut, don't make offers you cant fulfill, if you do and fail, it only compromises your company's good will, damage that enough and you sink your own ship.

    how about those donut-filled ads for livingsocial.com whioch seem to pop up everywhere - they've been plugging 'Perth daily deals' for months now but when you register you get a jolly "not yet".

    they're as bad as those "hot chicks in your area" ads ... just with less chest.

    A "Only XXX left" indicator would create more excitement anyway.

    Catch of the Day are the same. PS3 for such a low price for an hour but of course sells out within minutes. How many did they have on hand... 10 of em?!?!?

    As a coder, i can understand how "capping" such a deal could be overlooked, as often the aim is to get the maximum amount of interest/signups possible.

    However, as a business owner, i don't see how they could not consider such a scenario.

    But to their credit, offering a full refund is the right thing to do (especially since they'd quickly lose credibility if they had unhappy customers).

    @Tweak - i'm not sure i agree. Processing all of those payment/refund cycles would almost certainly wipe out any real profit from interest over that time period, and you could only get away with it a few times. I recall about 10yrs ago a domain supplier who was totally fraudulent - once they were found out and it hit the news, analysts said that if they had simply been legitimate, they would have made a healthy profit off all of their scammed clients, legitimately!

    Definitely group web sites need to allow businesses to set limit of purchases number.

    Regarding Aussie market of group buying web site check http://blog.altima.net.au there are fresh research on this topic

    The cudo website is terrible. On visiting you're forced to sign up by this annoying javascript overlay that cannot be closed. What's the deal with that? I just want to have a look before I give you any of my details.

    Companies that think they have a right to your information should be smacked upside the head. We're customers, not sheep.

    I bought my daughter some Ugg boots through a recent Living Social deal, it took about 8 weeks for them to arrive, but thankfully still before her birthday. I ordered size 9, however through a 'glitch' in their website ordering system, my order showed that I had order childrens size 3-4 (the default, I assume). Not only did I not receive a receipt for my purchase, but it doesn't appear on my 'previous deals' section - however, they do clearly have a record of the purchase. So, the kids Uggs arrive, and it's been two weeks of no joy from Australian Leather (no response whatsoever, and they have a message on their phone that says don't call, email), and no responsibility from Living Social. I'm so frustrated. All I want to do is exchange for what I ordered - why is that SO hard?

    The problem is that it wasnt an optional refund - it was forced by Billy (who has since resigned)

    Well, here's a horror group buying site ... OurDeal ... 15 weeks ago I purchased 2 quilts ... Still don't have them ... I'm not the only one having troubles! Many of their customers are having similar problems ... no delivery, long waits for deliveries, sub-standard products, bad or non-existent customer service, no communication regarding what is happening with purchases. Disgusting! They've even started removing and/or preventing Facebook users from viewing the negative feedback & complaints. I've been blocked from adding comments and the comments I did leave weren't even that bad. I've asked them why but no answer. They are not winning any friends or new customers and not good for their competitors either ... How can you trust other providers when your only experience with an Aussie group buying mob is so bad?

    I recently purchased an onQue “64GB USB3″ flash drive via a Cudo offer.
    Problem was the item I received was a fake 1GB unit loaded with special software intended to mimic & falsely display the non-existent advertised 64 GB capacity.
    (Full details on this widespread scam are documented on the sosfakeflash site)
    Supplier of this fake: http://mdjdirect.com/

    Full credit to Cudo in this instance for an immediate apology & full refund!

    I recently purchased, March 2013, through Cudo 1 years supply of Finish Powerball, 6 boxes containing 56 powerballs. I only received 3 boxes containing 45 in each. I paid $99 for this deal and would like the rest of my order please.

Join the discussion!

Trending Stories Right Now