SEOUL, April 27 Asia Pulse - South Koreans' newfound love for social networking and online shopping has inspired a slew of operators to jump on the social commerce bandwagon, the latest being global heavyweight Groupon.
But with consumer complaints over faulty deals on the rise, users and experts agree that better quality control should be guaranteed for the fledgling industry to continue growing.
Social commerce, a business model that is most well known through U.S. online commerce site operator Groupon Inc., generates profit by arranging daily discount deals between local retailers and subscribers through collective buying.
After Ticket Monster introduced the service in South Korea about a year ago, other homegrown operators such as Coupang and We Make Price have thrown down the gauntlet on the market. Around 300 social commerce sites are estimated to be operating in Seoul alone.
Despite the stellar growth of South Korea's social commerce market, valued at around 60 billion won (US$55 million) as of end-December, more and more consumers complain about the quality of the deals. They protest that customer service is being sacrificed for social commerce site operators' ambition for expansion.
Social commerce operators acknowledge the need to address the problems.
"The industry is aware of rising consumer complaints and the lack of a unilateral customer service policy," said Choi Min-sik, general manager of the Korea Internet Corporations Association, disclosing that consumer protection guidelines may be set up as early as May.
Choi said a consultative body of social commerce operators has been formed to systematically monitor customer complaints but that the problems regarding the operators are exaggerated due to the sudden public attention they received in the embryonic stage.
Yoon Bin-na, 26, is one of the complainants of poor quality of social commerce services. The Seoul-based market researcher said she felt deceived when she found that a restaurant voucher she bought wasn't actually a value deal as the Web site had promoted.
In February, Yoon bought a voucher for two people to dine at a ritzy deli in Myeongdong, a fashion district in central Seoul. The set menu she bought, consisting of high-end versions of street food, was being sold at half of its original price.
"I took my mom there, but after the meal, she said discounts come with a reason. It was embarrassing," said Yoon, adding she is now more careful about buying deals at social commerce sites.
"I felt deceived. Why did I go through the trouble of buying the coupon online?" she said.
According to a survey by the Korea Chamber of Commerce & Industry, one out of four social consumer site users said they were discontent with the deals. More than 30 per cent of the unhappy respondents said they were unable to use the deals due to insufficient supply, while 19 per cent had problems regarding refunds. Seven per cent of the respondents said the deals were lower in quality compared with normal-priced products.
The rise in consumer complaints has even triggered a wave of anti-social commerce moves. Social Consumer Cafe, an online community of unhappy social consumers, now represents more than 4,000 consumers after opening with 17 members in February.
Hundreds of reviews posted on the online space tell stories of people who were denied refunds or could not use their coupons due to limited supply. A large number of stores that advertise deals on social commerce sites are small- and mid-size retailers, which may be incapable of handling a sudden rush of customers.
"The existing operators are not offering good quality or customer service," said Jung, a 35-year-old office worker who established the online community and did not want his first name used. "They seem to only focus on beefing up subscriptions by airing television advertisements and increasing the number of deals without proper screening."
"The number of new subscriptions easily outweigh the number of consumers who go through the hassle of filing a refund or making complaints, which seem to be the reason social commerce operators ignore consumer complaints," said Jung, "But they should know what's more important for the industry's long-term growth."
Individual operators, nonetheless, are stepping up efforts to satisfy consumers.
Ticket Monster launched a 20-member team in February to screen the quality of deals and provide customer service education to retailers.
Coupang reinforced its customer service by assigning 80 of its 200-strong workforce to addressing customer complaints and improvement of the quality of deals.
Groupon, which made its debut in South Korea in March, puts quality and timely customer service at the vanguard of its strategy, beating wide expectations that it would opt for a more novel approach to make up for its belated start.
"The most important thing is going back to the basics. We hope to build trust by providing timely responses to customer needs and maintaining quality control," Groupon Korea CEO Hwang Hee-seung said at the launching show in Seoul.
It is unclear whether the ongoing debate over social commerce is a fundamental issue or part of a trial-and-error process all start-up businesses go through. But one thing is clear: consumer opinion and their demand for higher quality is not something social commerce site operators can overlook if they want to keep growing.
"Individuals are becoming one-person media on the back of robust social networking," said You Jae-hoon, a researcher at LG Economic Research Institute.
"Their opinions are having more and more impact on the thoughts of their friends and people within their online network boundaries."
"In that sense, social commerce operators should put more effort into each deal rather than simply increasing the number of deals for one-off marketing effects," said You.
Social commerce shoppers offer an easier explanation.
"Consumers want decent deals at a good value price," said the Seoul-based market researcher, Yoon.
"Nobody wants to trade off quality for a small discount."
(Yonhap) ms 27-04 1012
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