Social commerce sites under fire

Companies blamed for exaggeration, cheating, lack of supervision

By Yoon Ja-young

An office worker, who wished to be identified only by her surname, Kim, loved searching social commerce sites for good deals.

Now, she is considering giving up her habit as she has begun seriously doubting the credibility of these services.

She recently found a tempting deal at Groupon Korea, the third biggest player in the industry. Ro Bag, popular among young females here, was selling at between a 41 to 80 percent discount. On the Groupon site, it introduced the bags as made of python or crocodile skin.

“It is made of python leather, which boasts the most beautiful pattern among snake skins, and the pattern is enough in itself to offer splendors,” the site introduces the “Python Zina Soft Brief.” The bags there were all priced for less than 550,000 won.

“I knew that python and crocodile skin is extremely expensive, so I wanted to make sure the bags were real leather.” When Kim contacted the Ro Bag store in southern Seoul, however, they told her that it was calf skin with patterns mimicking those of python and crocodile.

When contacted by this reporter, the Ro Bag shop confirmed that the bags put up for sale on Groupon were made of calf skin, not python or crocodile skin. “They are expensive and difficult to get, as far as I know,” a worker for the store said.

Groupon Korea explained that they received an introduction about the products from the venders.

“The sellers sent the wrong information. Our editors write the introductions for products but they are based on the information provided,” a Groupon Korea official said. “We check the products to confirm their quality and authenticity but the material side of it is based on information from the seller.”

She added that sellers give refunds if the consumers want.

However, customers are buying products and services because they trust social commerce companies.

“That constitutes false and puffed up advertising,” a consultant at the Korea Consumer Agency said, when contacted. She said the agency will request Groupon Korea to correct the false advertisement when a consumer files a complaint, and added that customers can also contact the Fair Trade Commission (FTC).

Social commerce services losing trust

It is not the first time for social commerce services to make consumers doubt whether they are trustworthy.

The FTC recently ordered a number of social commerce services including Groupon Korea and WeMakePrice, the fourth biggest player in the industry, to rectify wrongdoings. Groupon and a few minor social commerce companies had been exaggerating the number of orders for deals.

“The exaggeration would helped them not only attract more customers but also convince sellers to launch a promotion with Groupon. You can’t totally believe in the numbers on websites,” an industry source said.

Groupon Korea also had its employees upload reviews and evaluations of the products on its website, and delayed refund requests for over a month.

“We started the service in March, and it happened in the initial stage of our business,” said the Groupon official. Groupon Korea has stressed that some employees manipulated the number of orders and uploaded reviews due to excessive ambition.

WeMakePrice has sold fake products. Ultra Facial Cream by Kiehl’s and sneakers by New Balance sold at the site turned out to be fakes. The authenticity of products sold on social commerce services continues to be doubted. The Busan Main Customs Office recently caught an importer who sold fake branded sneakers from China and sold them online, including through some social commerce services.

The social commerce market has rapidly grown in only a year or two. Over 500 companies are competing in the market which is expected to reach 1 trillion won next year. It has attracted customers with cheap prices and offered small sellers an effective channel to reach consumers.

According to one report, one out of ten Internet users bought a product or service through social commerce in the past year, and the ratio surges to over 20 percent among females in their 20s.

However, 58.3 percent of users said they weren’t satisfied with the service.

“I am concerned that a number of incidents would eventually lead the consumers to lose trust in the whole social commerce industry,” an analyst said. He advised that the industry set up guidelines to gain customer trust.