Canada

Group-buying website comes up short

Group-buying websites are the fastest growing player in online shopping, but with so many companies joining the action, some customers are paying the price for deals that go wrong.

Deal.55 fails to deliver after billing customer

Group-buying websites are the fastest growing player in online shopping, but with so many companies joining the action, some customers are paying the price for deals that go wrong.

The websites offer deep discounts on everything from lifestyle services to restaurants and holiday travel. The stock may be surplus or offered at a greatly reduced price to commit a certain number of customers to a business. The sales are usually only offered for a few days and if enough people don't sign up, nobody gets the deal.

An online coupon sent via email from Groupon is pictured on a laptop screen. Dozens of group-buying websites have been established in Canada. ((Fred Prouser/Reuters))

The number of group-buying websites in Canada has grown from just a handful to dozens in the past year. Among the players are Groupon, Groupola, Living Social, Tuango and FabFind.

There are more than 20 group-buying websites in Montreal and more than 60 in Toronto, according to Albert Bitton, the head of Group Buying Canada, a consultancy group.

"It’s becoming easier to set up a group-buying site, with specific tools set up for this now," Bitton recently told the Montreal Gazette. "There are still plenty of customers because consumers don’t really care how many group-buying sites there are out there, as long as they find a deal they want."

While many shoppers are thrilled with the deals they get, not everyone has a satisfying experience, as Lauren Murchison of Guelph, Ont., learned the hard way.

Murchison stumbled across the group-buying website deal55.com and noticed a $100 Home Depot gift card was being sold for $45. The site said it had deals with major retailers like Winners, Indigo and Victoria’s Secret to offer customers as much as 55 per cent off regular prices.

Murchison bought a Home Depot card, but was charged for three cards and for another company’s card, which she did not request.

She said she tried contacting deal55.com but got no satisfaction. She then contacted her credit card company.

"It was definitely a big hassle having to get my money back and never getting my gift card," she said.

CBC News checked with companies that deal55.com claimed to be associated with and Home Depot denied having any relationship or arrangement with the website.

The website's owner, Lawrence Farbman, blamed complaints on misinformation.

"When we started, there was a buzz," he said. "People couldn’t understand it and sabotage happened almost immediately. Within two or three days, there were blog sites just bashing and demeaning the whole concept itself."

Farbman said deal55.com is now in the process of restructuring its business model. The website is no longer operational and a note to viewers says it is temporarily shut down for maintenance.

The number of group-buying websites could double in the next year and a half, Bitton said. And that could lead to even more growing pains.

With files from the CBC's Tom Harrington