Customers' steam is rising, and it's not because of the hotpots

Group purchases leave a sour taste in the mouths of buyers

All Li Ting wanted was a hotpot meal, but all she got was an experience that left her boiling with fury.

Last month Li, 25, went to a group buying website and pre-paid 89 yuan ($14, 10 euros) for a hotpot meal.

The voucher she was issued stated clearly that it was valid until Oct 27. But when she called the restaurant on Oct 20 to book a seat, the manager told her that the voucher could not be redeemed as the website had not settled its dues.

Over the next three days Li called the group-buying company numerous times, and it promised to solve the problem at first but refused to give a refund.

Li's woes are not uncommon. As the group-buying industry has grown, so have questions about the service and products that can be bought through its channels.

Statistics from tuan800.com, an Internet classification website for group-buying companies, show that the number of complaints doubled from 547 in January to 1,152 in October. And there was a spike in figures after the National Day Holiday, generally a period of high consumption. From Oct 8 to 16 there were 405 complaints, up by 62 percent compared with the same period last year.

The China Consumers Association (CCA) says complaints about group buying focused on five areas: counterfeits; buyers being intimidated to spend more; illusory discounts; time limits on the redemption of purchases and services; and the difficulty of redeeming vouchers.

Wu Xuefei, an analyst with China e-Business Research Center (CBRC), says that the low industry entry threshold has attracted thousands of unqualified players to the market. There is little doubt that the motives of some are far from innocent.

"With group buying you pay before you consume, so (companies) can make money by offering vouchers that cannot be redeemed," Wu says.

In August 5,039 group-buying companies were operating in China, and perhaps their proliferation is partly explained by how little it costs to set them up. Anyone with 10,000 yuan and a team of 20 people can start a group-buying business, but, Wu says, most of the existing companies cannot offer adequate service.

However, the bigger companies have problems, too. Even Gaopeng, the Chinese joint venture of Groupon and Tencent Holdings Ltd, has been plagued by counterfeit selling.

Last month the company offered 80 percent discount for a Tissot wristwatch worth 3,500 yuan. More than 400 customers took the bait, but later authorities revealed that the watches were fakes.

Gaopeng refused to admit liability, and a few days later began blaming the supplier in Tianjin. To settle the dispute, Gaopeng eventually refunded the customers and paid each an extra 200 yuan.

"The case of Gaopeng as well as other companies reflects their irresponsibility," says Qiu Jianguo, director of the compliance department with the CCA.

"Companies need to be strict in selecting local service or product providers and filter out low-quality ones as early as possible. When a complaint is raised, websites need measures in place to satisfactorily deal with consumer complaints."

There is an onus on consumers, too, Qiu says, namely to think twice when making buying decisions.

Some group-buying websites have realized how bad things have become and have taken steps to retain customers.

Meituan began a refunds service in March allowing customers to get their money back if they were dissatisfied with the service or did not redeem a coupon.

It cost Meituan over 10 million yuan, but Wang Huiwen, the company's vice-president, says the money is well spent, given that the whole business is customer oriented.

Meituan also has a system that allows customers to rate services or product providers. "If the rating is too low, we will end the cooperation with that provider immediately," Wang says.

Last month the State Administration for Industry and Commerce was nearing the end of research on the first regulatory document on group buying.

"With State Administration for Industry and Commerce supervision, the number of complaints could be reduced a lot," Wu says.