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5 Reasons Customers Are Turning Against Groupon

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Grumbles about Groupon's false advertising and poor customer service are reverberating throughout the Web.

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Shame on me. I was fooled -- not once, not twice -- but three times by Groupon (GRPN). Although I consider myself, by and large, a fairly savvy consumer, it turns out I had a steep learning curve when it came to realizing the extent to which I was being taken by the daily deal behemoth.

As it also turns out, I'm not alone in my buyer's remorse. Not by a long shot. Grumbles about Groupon are reverberating throughout the Web. There's even a dedicated Groupon griping Facebook page.

In the UK, the Advertising Standards Authority got involved and the Office of Fair Trading (or OFT) launched a formal investigation that recently found Groupon in "widespread" breach of consumer protection regulations. The company's Middle East arm has been so "flooded with complaints," it's changed leadership twice in less than six months.

Though the charges leveled against Groupon are numerous and varied, they usually fall into five basic categories.

1. False Advertising
Groupon has certainly achieved a level of trust among consumers, and for good reason. The site claims to have "hundreds of experts" in its employ who "painstakingly research" the businesses with which it partners.

So when a deal for Zaggora Weight-Loss HotPants is featured, customers are more likely to believe Groupon's claim that the "slimming technology...helps drop up to two dress sizes in two weeks" and not liken the product to some kind of "As Seen on TV" scam.

Likewise, Groupon members wouldn't expect that the photo used in the Noell Strahan Photography Studio & Salon deal for "Boudoir Photo Shoots" to be stolen from another photographer. And because of Groupon's alleged laborious vetting process, subscribers would tend to assume the photographer's website credits: "Voted #1 on THEKNOT.com & the BBB as the #1 CHOICE for WEDDINGS." Never mind that the Better Business Bureau doesn't rank wedding photographers or that Noell Strahan Photography Studio & Salon isn't even listed as an accredited business.

Misleading or outright dishonest marketing claims -- especially among health and beauty products -- has become so rampant that Groupon, in accordance with OFT regulations, must now support each one with "adequate substantiation."

2. Overselling Deals
A recurring theme among disgruntled Groupon customers is that the (often small) businesses can't keep up with high order demands. Since Groupon takes its cut upfront, it becomes the customer's problem when the vendor can't deliver in a timely manner -- or at all.

This issue lies at the heart of the Middle East Groupon crisis as customers have been forced to wait for over two months for their products. Groupon subscribers in the UK and Europe who purchased a Clouds Memory Foam mattress have it far worse. "Another Groupon scam!," writes a customer on the Groupon Complaints Facebook Page. "I paid for a Clouds Memory Foam mattress 6 months ago and still have not received it! Groupon will not refund my money, Clouds won't answer my emails or phone calls."

Stateside, things aren't much better. A Brooklyn wine shop called Donna Da Vine simply refused to honor its $25 vouchers worth $75 of wine. "We have been there THREE times trying to redeem the groupon," claimed a spurned customer on Yelp. Each time she tried, she and her husband were turned away. Finally, the wine shop ended up terminating the offer altogether.

Protracted waiting periods can also apply to receiving Groupon services. In addition to the numerous examples I read online, I can personally attest to facing a five-month delay for a chiropractic adjustment from the Giving Nature Center in Manhattan. The facility had a totally separate appointment calendar for its social booking clients (any customer who purchased a coupon through either Groupon, AmazonLocal, or LivingSocial), and we were put on a wait list normally seen only by kidney transplant candidates.

You read that right. Amazon (AMZN) has grabbed a piece of the daily deals business. In fact, within the space of about a year, it's become the fourth-largest daily deal provider in the country. Even Google (GOOG) is getting in on the action with its Google Offers service that sends subscribers in certain areas daily email offers and has a free Android Market app.

As per the OFT action, before selling vouchers, Groupon must now carry out "an accurate, honest and realistic assessment of a merchant's ability to provide goods or services in the quantity or time frame suggested."

3. Inflated Savings Claims
Nothing makes daily deal snatchers succomb to that itchy clicking finger like deep discounts. The bigger the percentage they think they're saving, the more attractive the offer. The operative word here is "think." We're assured that Groupon's tireless work force is "weed[ing] out the bad apples" and certifying that its partners' quoted values square with what is normally charged. Such is, unfortunately, not the case.

Instead, that task was taken on by online services booker Thumbtack. Five out of five times, Thumbtack found the regular price of the local service was exaggerated in the Groupon deal. The worst offender in this particular sample was JB Cleaning Services, which claimed its $49 offer for two hours of home cleaning was a 67% discount off its normal rate of $150. But according to a price quoted over the phone to Thumbtack, the service actually costs only $80. More than 510 people bought that deal.

The OFT called Groupon out on this one, too, and now the site's listed reference prices and savings must be "accurate, honest and transparent."

4. Substandard Customer Service
From unreturned phone calls and emails to diversionary tactics to delayed refunds or no refunds at all -- Groupon customer service is a bottomless pit of frustration for subscribers. A visit to Groupon's page on Customer Service Scoreboard shows complaint post after complaint post reading: "totally unsatisfactory," "absolutely hopeless," "I'm totally disgusted," "someone has to do something about this," etc.

Out of 56 total comments about Groupon on the site, 44 were negative. The company has an overall customer service rating of 53.83 out of a possible 200 points. This score puts Groupon customer service and support in the "disappointing" category which, to be fair, is still a notch above "terrible."

5. The Broken Groupon Promise
In the lower right corner of every city's homepage is the Groupon Promise: "If the experience using your Groupon ever lets you down, we'll make it right or return your purchase. Simple as that."

In reality, this promise is about as flimsy as the pinky swear pictured in its logo. Lulling customers into a sense of security with a patently false guarantee is probably the company's most egregious violation. Subscribers feel safe ordering from otherwise unknown merchants because, as Groupon assures, "We're so confident in our featured businesses that we back them with the Groupon Promise."

Groupon did not issue refunds to the many dissatisfied customers whose testimonials I read online. And when I tried to get my money back for a service that failed to deliver as advertised, I was refused as well. Despite my efforts to explain to customer service rep Jennifer D. why the deal was deceptive, she shot back each time blaming me. "You changed your mind," she said. "I'm sorry to hear that you're no longer interested..." She suggested I gift the unused Groupon to a friend.

"Most companies think it's crazy to have such an open return policy," touts the promise. "They create red tape that makes it difficult for their customers to get good service."

What's actually crazy is a company devising an obstacle-free open return policy in one reality and then conducting business in a wholly separate one.
No positions in stocks mentioned.

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