Millions lost in shocking rip-off

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The website of Nhom Mua, Vietnam's biggest group buying company, is still offering deals to customers

Many customers who bought vouchers from two major online coupon companies have been left high and dry after they shut down without warning, with no government agencies likely to intervene.

Many suppliers have refused to provide the service to voucher holders of Dealsoc (shocking deal) and Nhom Mua (buying group), saying the discount sites still owe them money. Both suppliers and customers say their recent attempts to contact the companies have been futile.

Experts in the field estimated if nothing is done, the customers stand to lose at least US$5 million, based on the monthly revenues of the sites.

Groupon company established "group buying" in 2008 in the US, and back then it was considered a successful e-commerce model which benefits suppliers, website owners as well as consumers.

But the company said competition from Amazon and Google, as well as the financial crisis in Europe has hurt its bottom line. The world's largest online daily deals provider went public in November 2011 but shares fell nearly 74 percent this year and closed at $5 per share on December 18.

Group buying came to Vietnam two years ago, with Nhom Mua being one of the first, as the country's number of Internet users was soaring. The new business model began to boom last year, when Dealsoc entered the market in August. There are now some 100 providers of similar services.

Suppliers offer promotional deals with the condition that they have to be purchased by a minimum number of consumers, usually between 50 and 100, within a certain timeframe. Group buying companies then advertise their deals on Facebook and other social networking sites, send out mass Twitter messages and emails in order to reach their targeted market.

Consumers in turn ask family members and friends to join them in taking advantage of an offer, and the discount sites receive a cut from the suppliers. Vouchers, for a wide range of products from meals to travel packages, are offered for between 40 to 70 percent below the going market rate.

But the market appears to be falling apart.

Dealsoc's headquarters in Ho Chi Minh City shut down early this month, with a notice blaming the closure on "internal problems."

News website VnExpress cited several Dealsoc suppliers as saying their partnership with the company went smoothly at first.

Dang Duy Cuong, director of a private home appliance trading firm, said "the business used to have no problems. But it has not made any payments recently."

Dealsoc contracts to pay the vendors for their products and services before an agreed upon date, usually the expiry date of a discount offer.

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But Cuong said the company has not been honoring the agreement. Now he is holding on to many old vouchers that customers used to buy his products, hoping he will be able to eventually be reimbursed by Dealsoc.

With several suppliers in the same circumstance, customers have been having their vouchers rejected.

Nguyen Minh Tiep, a customer, told news website VnExpress: "I bought four meal vouchers for VND75,000 each and recently when I came with my last one, the restaurant refused to serve me.

"They told me they are keeping hundreds of vouchers and they could not reach Dealsoc to demand payment," he said.

Like the vendors, Tiep has no idea how to reclaim his money.

Many Nhom Mua customers are finding themselves caught in the same problem since the firm stopped providing services last month, reportedly under the pressure of shareholders who doubted the director's financial management capabilities.

Vietweek has received several complaints from the affected customers.

Tran Duc Quang, one victim, said on December 11 he received a call from La Sapinette Hotel in the Central Highlands town of Da Lat that told him his booking for later this month, which he had paid VND7 million (US$336), had been canceled.

A person from the hotel told him his booking through Nhom Mua could not be accepted because the company still owes the hotel money from previous deals, Quang said.

His contract said Nhom Mua and the hotel must guarantee to provide services paid for, or else offer compensation.

Nhom Mua's website (nhommua.com) is still running. The firm's headquarters in HCMC has been closed. Several attempts to reach the office by phone were not successful.

Established in October 2010, Nhom Mua was the most popular group buying site in Vietnam, drawing nearly four million hits to its website each month.

It employs around 900 people at offices in Hanoi, HCMC, Can Tho and Hai Phong.

The company said it has occupied more than 60 percent of the market, with nearly two million members and monthly revenues of around VND44 billion ($2.1 million).

But the business recently entered its rough path.

Its director Tran Duc Thang was asked to step down last month amid accusations of embezzlement. He is currently under police investigation. He told Vietweek he is waiting for a response from the investors to resume the business, pay the staff and recommence carrying out the deals.

But he said any service rejection from the vendors was unilateral and had not been agreed to by Nhom Mua.

Several Nhom Mua suppliers said the customers should not be victimized and that suppliers must "accept the consequences" when entering such a new business.

Huynh Quoc Huu, director of a dental clinic in HCMC, said while he is no longer partnered with Nhom Mua, he thinks vendors should not punish customers just because of problems with the group buying site.

At the end of the day, businesses need to protect their reputation with customers no matter what, he said.

"When we choose and agree to partner with group buying sites, we have to accept both the benefits and risks... Even if the group buying companies fail to make payments, customers should not be denied the services," Huu said.

But legally, it's tough to determine how the suppliers involved should behave, as related government agencies said they have no jurisdiction to intervene.

Ho Thuy Ngoc, a legal expert for e-commerce issues, said the group buying sites are supposed to follow operational formula laid out by the Law on E-Transactions, the Commercial Law, and be supervised by the e-commerce department at the Ministry of Industry and Trade.

But a representative from the HCMC Department of Investment and Planning, which licensed the sites, said it was only responsible for ensuring their business models corresponded to the issued licenses.

Meanwhile, Tran Huu Linh, head of the Trade Ministry's e-commerce department, said the business practices of Dealsoc or Nhom Mua are not described in current e-commerce regulations and thus, the companies do not fall under its jurisdiction.

Experts in the field said customers might be plumb out of luck as local laws have not been updated well enough to protect them.

Lawyer Tran Huu Huynh, chairman of Vietnam International Arbitration Center, said group buying will continue to be a trend and laws need to be adjusted to protect people from malfeasance within the expanding market.

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