Monday, February 21, 2011

More Trouble for Groupon in Japan - Again!

Incredibly, Groupon is in the news for problems again in Japan. Is there any other business in the world that is in the news once a week for screwing things up like Groupon is? I don't think so. This time, a client company claims that payments for the campaign from Groupon are too slow in coming and, if they keep up the deal with Groupon, they'll go bankrupt. So they unilaterally cancelled it.

There were also issues with people creating fake Groupon coupons somehow and Groupon was slow to react to the problem once the shop reported it. 

Once again, people who bought Groupon stuff feel cheated.
How long can this go on? Wim-folk can only get jilted
so many times until she's thru with you....

Some people have mentioned to me that they don't think Groupon can survive through  2012... Maybe they are right. Groupon screwed up big time in Japan at New Year's; then they messed up the apology; they totally blew it at the Super Bowl - which, in turn, created a huge blow back and "Boycott Groupon" movement on Facebook; they messed up Valentine's Day and they handle their logo and branding like rank amateurs.

All of which have appeared in the Japanese media.

Now, incredibly, they are in the news again. This time with a twist as a Groupon client company is complaining about Groupon and has cancelled a campaign mid-way as they say that they cannot afford to do business with Groupon and that Groupon's payment system and service is slow.

They say that, if this business deal continues with Groupon, they will go bankrupt, so they must cancel the deal.

Way to go Groupon. 

I wrote that Groupon's business model is not sustainable. Now, here is a client company going public with complaints about Groupon business practices in another collapsed deal with Groupon.

The story appears in today Sankei newspaper. The link is here:  The original article is only in Japanese, but I have made a quick summary translation for you here: 

(Basically the story is about) a shop in Tokyo's Kichijoji that sells "Tai-yaki" (Tai-yaki is a confection that is popular with children). The shop sold coupons through Groupon for the Tai-yaki. The regular price is ¥1,000. The Groupon price was ¥500. The shop sold 1,700 coupons in total. The coupons were valid until June 2011.


But on the 15th of the month (Feb. 2011) the shop announced on their own blog that they would discontinue the sale and cancel validation of Groupon coupons immediately. 

On the 16th of the month, the shop again announced on their blog, that Groupon had promised the shop "many repeat customers" but Groupon hasn't paid the shop the money, so the shop says that if these customers do come, they will go bankrupt.

Already Groupon sold coupons for 1,700 @ ¥500 each. Already 400 customers have used the coupons, yet Groupon has only paid the shop for 120 customers. The shop says that they cannot do business with Groupon and, if more customers come to use the coupons, they will go bankrupt as they are unable to pay for ingredients and overhead. 

The shop says that unless Groupon pays the money, they cannot afford to pay for supplies and materials. So the campaign was cancelled immediately. 

The shop also complained to Groupon that there were fake coupons circulating and said that Groupon was very slow to react so the shop was unable to control the situation.

Sankei Newspaper tried to contact Groupon Japan but was unable to get comment.

Groupon Japan is the company that was responsible for the New Year's "Oseichi" food that sold deliveries of food that were completely different than what was advertised.

Well, that's the story for you. I wanted to be the first person in the world to get this story out for you English speakers. When Groupon collects the money for all the tickets they sold, why don't they pay immediately to the client?

Gee, I do remember hearing the lame old excuse of "the check is in the mail" but in 2011, I guess that would mean electronic mail so you have to wonder what's taking so long?

Will you be doing business with Groupon as a client or customer? The lesson to be learned is, "Caveat Emptor" - Let the buyer beware! In Groupon's case, I reckon that means "Let the buyer and client beware!"

Japanese story from Sankei Newspaper:








Thanks to Yuka Rogers for help with translation.

1 comment:

Anonymous said...

Thanks for the enlightening story!
I have a bar in Chiba and sold coupons through Groupon once in 2010. For about 17 coupons sold, there were about 10 redeemed (roughly 25 new customers), 2 of the groups came back once more, the rest just took advantage of a cheap meal. So much for creating "repeat customers..."
For a \3000 coupon they got \6000 of food and drink. Embarrassingly, (I know..!) my FL ratio is nearer to 2/3 than 1/3, so I lost money in the vain hope of gaining repeat customers...
I'm in Chiba city, but the customers came from all over the prefecture...
If you figure the "cost" of the coupon = loss of revenue (opportunity) \3000 + commission \1500 + FL (OK, let's be nice) \2000 = \6500 for \6000 worth. I guess that's a total loss.
Groupon approached me again to try a different menu strategy, yadi, yadi, yadi...
My reply was, "I could stand on the street in front of my bar and give out half price drink vouchers to passers-by (who actually live within stumbling distance!) for a predictably much better return. Thanks, but no thanks.."
I agree that it's unsustainable. I've been approached my similar "flash marketing" sites, offering a better commission, etc, but at the end of the day it's probably just coupon clippers who will take advantage of you.
Thanks for confirming what I paid to learn!
(And thanks James for the link!)