Cleaning up and uniting the online deals industry is not an easy task but it’s one Stavros Prodromou is fired up to take on.
Prodromou – born in Germany, living in the UK – leads the newly formed eDeal Association (eDA), previously known as the Global Daily Deals Association (GDDA). Before this project, he spent seven months as senior consultant/general manager for Groupon UK and founded two daily deals sites of his own, one of which sold to a rival this year for a low six-figure sum.
“I’ve been in the industry a long time,” he said. “What was missing was a forum or place for the industry to collaborate.” In March 2012, he put together a forum to discuss issues facing the industry. “Until then, there had been no industry best practices, no guidance, no forum and no experience sharing. What came out of the summit was that in order for the industry to be sustainable, a trade body was needed.”
The eDA now claims about 36 members from the UK, continental Europe and the US. One of its flagship initiatives is the voluntary Daily Deals Code of Conduct, a 10-page document covering most of what you’d expect, with sanctions or referrals to the appropriate authorities for those that fail to comply. Signatories so far include DailyDeal (owned by Google), TimeOut Offers and the UK’s Nectar.
The eDA is also in talks with Amazon, the new owner of major deals site LivingSocial.
The most obvious name missing is Groupon, the industry leader that shot to tremendous heights, including a $700million stock market listing, before crashing down. The company’s shares are still down 80 per cent, after $568.6m in revenue and a $25.4m operating profit in Q3 2012 failed to impress analysts.
In Europe, Groupon’s reputation took a hit this year after the UK Office of Fair Trading (OFT) found it guilty of “widespread” breaches of consumer protection laws and leaked emails suggested a “slavedriver” internal culture in Germany.
“Weeding out” the bad guys
Prodromou acknowledges the online deals industry has some reputation-recovery to do – and puts a good part of the blame on fast growth in the industry’s early days. Low barriers to entry and apparently easy money brought “thousands” of new deal companies online. Some were misleading or deceptive, he said. Others put closing deals ahead of the best interests of the merchants they were partnering with.
“Along with some highly publicised cases, the cupcake incident for example, consumers began to distrust the industry as a whole. Daily deal sites need to be honest and offer better consultation with merchants, as the model is not efficient for every product,” he explained. “The association aims to help weed out those deal providers that have given the industry a poor reputation…”
Does he consider Groupon the lead culprit? “It’s relative,” he said. “Put it this way – Groupon has been taken as the example of what went wrong because it’s the biggest player. We have hundreds of thousands of coupons each month, so you imagine how many people are buying these deals.”
A shift in coupon culture
With Germany’s Marc Samwer out as head of international operations, a new senior vice-president for Europe, the Middle East and Africa since then and a top management shake-up in Germany, there’s room for a shift in culture at Groupon for the better – including, perhaps, signing up to a voluntary industry code of conduct.
In an emailed statement, Groupon spokesperson Sophie Guggenberger implied the company is open to the idea but not yet sure the eDA’s code is the right one to join:
Any code needs to be robust, enforceable and ensure the highest possible protection. At Groupon, we are constantly improving our standards and approaches to lead the industry in ensuring the best possible levels of partner and customer service. We will be continuing our engagement with regulators, retail and consumer organisations. We welcome these types of initiatives and will evaluate them on an ongoing basis.
In Germany, we welcome any initiative that drives for higher standards for consumer rights. Any trade organisation needs to be fully supported by the regulators, ensure that any code builds on consumer rights and is in full compliance with German laws. We have our own high standards of internal controls around code of conduct within Groupon Germany, which include an employee whistle blowing policy and program, anti-fraud measures, strict quality assurance controls and, of course, our deal quality and legal team.”
She said Groupon had strengthened some of its own internal measures – “quality assurance controls and anti-fraud measures, and we have a strong focus on deal quality” – since the beginning of the year.
New deals ahead
Groupon will need to continue rebuilding its reputation to avoid losing market share to a new wave of local commerce and deals companies, some of whom openly define themselves against it. It will need to innovate, too – and is, with new products such as Groupon Rewards. Groupon CEO Andrew Mason has said he wants the company to move past daily deals to become the “operating system for local commerce“.
New business models and products is something the eDA’s Stavros Prodromou expects to see more of:
“We are now seeing the industry diversify, as many businesses expand and add innovative services, update pricing and other channels like flash sales and social commerce. I expect more businesses to do the same in 2013 as deal providers fight to survive in this competitive and crowded space.”
He’s confident, too, that more players will come around to signing up to the eDA. “I think most of them will join – if they’re still alive,” he said. “But of course, the purpose has to be made clear. Don’t forget, we’re also still young.”
Image credit: cupcake, by Flickr user hoveringdog