Groupon?

CityPress - - Tenders & Auctions - Lake rec­om­mends that if you have a valid Groupon voucher for a ser­vice or prod­uct ful­filled by a third party, you should con­tact that com­pany to make sure the ser­vice or prod­uct will still be pro­vided even now that Groupon has gone un­der. Ac­cord­ing to th

This week, Groupon SA an­nounced the clo­sure of its busi­ness. This fol­lows af­ter the world’s big­gest group­buy­ing and deals web­site an­nounced a loss of $35.8 mil­lion (R485 mil­lion) and that it’s ex­it­ing 12 coun­tries this year.

“The com­pany has iden­ti­fied its go-for­ward coun­try foot­print to con­sist of 15 coun­tries, down from 27 in its port­fo­lio as of the sec­ond quar­ter of 2016,” says Groupon in its third-quar­ter 2016 re­sults.

Arthur Gold­stuck, manag­ing di­rec­tor of World Wide Worx, says he’s not sur­prised that Groupon has run into dif­fi­culty. “We’ve been say­ing for a while that the busi­ness model has run its course. We felt that, when the orig­i­nal founders in the South African busi­ness left, the writ­ing was on the wall. The fun­da­men­tal flaw is that peo­ple get hooked on the dis­counts and not the sup­pli­ers. The dis­count is a loss leader for the sup­pli­ers and you can’t build a busi­ness on that.”

There are also ques­tions and con­cerns around whether Groupon and its part­ners will up­hold vouch­ers that have been bought by con­sumers if it were to shut down its South African busi­ness’ doors.

Ros­alind Lake, di­rec­tor of Nor­ton Rose Ful­bright, which spe­cialises in com­pe­ti­tion and con­sumer law, points out that, un­der the Con­sumer Pro­tec­tion Act (CPA), if a sup­plier goes into liq­ui­da­tion or busi­ness res­cue, liq­uida­tors are re­quired to look at any­thing owed to con­sumers.

“So it’s likely that who­ever winds up the busi­ness would need to sift through any out­stand­ing Groupons or if any­body has paid money and hasn’t re­ceived things. But the process is un­cer­tain. Whether you will get all your money back is not clear and could take a while,” she says.

Should Groupon not be in a po­si­tion to pay sup­pli­ers, Lake be­lieves this could be­come a messy sit­u­a­tion but feels that the con­sumer still has pro­tec­tion un­der the CPA. “The CPA says you [the com­pany] are re­spon­si­ble to the con­sumer and you can’t say that your third party ser­vice provider hasn’t per­formed. So con­sumers are likely to have a claim against both Groupon and the ser­vice providers.

“But it will be dif­fi­cult if Groupon hasn’t met its con­trac­tual obli­ga­tion and paid the money across to the sup­pli­ers, as this ob­vi­ously puts them in a dif­fi­cult sit­u­a­tion as they will have to pro­vide the ser­vice for free.” WHAT TO DO NOW? IS THERE STILL A FU­TURE FOR GROUP-BUY­ING WEB­SITES IN SA? There are a num­ber of group-buy­ing web­sites in op­er­a­tion in South Africa, in­clud­ing Wikide­als, Daddy’s Deals, DealZone and, new en­trant for 2016, Bula Deals, to name a few. But Gold­stuck be­lieves the in­dus­try’s days are num­bered. “Be­cause sup­pli­ers don’t stay, Groupon and other group-buy­ing sites have to con­tin­u­ously find new sup­pli­ers. They will have to di­ver­sify from this model to of­fer value to sup­pli­ers and users if they want to sur­vive.”

*City Press asked Groupon SA for com­ment but, de­spite numer­ous ef­forts to con­tact the com­pany, it failed to pro­vide a re­sponse by the time of pub­li­ca­tion.

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