Groupon Korea’s marketing tactics called into question

The Korean branch of U.S.-based global social commerce powerhouse Groupon is facing growing criticism after it posted wrong information about displayed items and even sold products that it had not secured.

Groupon Korea on May 2 canceled a “secret megadeal” two hours before the event launch, during which the company was expected to hand out 500,000 giftcons ― mobile gift coupons ― which would give a 3,000 won discount on Paris Baguette goods. It said customers would also be able to save 5,000 won, along with the discount coupon, if they registered themselves as Groupon’s members.

News of the event quickly spread through social media outlets and “Paris Baguette 3,000 discount coupon” even ended up becoming one of the top search words on the country’s major portals.

But Groupon Korea soon posted a statement on its website which said the event had been canceled. The website also crashed soon after because people, who did not know the deal was off, started logging onto the site to get their vouchers.

The deal was cancelled because Groupon’s deal with SPC, which runs Paris Baguette, had not been finalized when the news got out. So SPC decided to scrap it, claiming that Groupon Korea released the information ahead.

“We will be more careful in securing the item information as well as its contents in the future,” said Groupon officials. However, the company denied that it was responsible for unveiling the information to the media.

Then, a day after the May 4 incident, the company had to post another official apology for not checking the specific information of its featured product.

An air purifier called “KAIST air cleaner” was the deal-of-the-day product of Groupon Korea, however, people pointed out that the university had nothing to do with the item.

Not only that, KAIST had already labeled the item on its homepage in 2009 as a product using false advertising, which was being sold in sites like Auction.

“We truly apologize for going forward with the deal without finding out the details about the manufacturers,” the company said.

Industry watchers say the controversy surrounding the social commerce site operator will likely further escalate without a careful market analysis and a relationship built on trust with its customers. The company only announced its launch in Korea two months ago.

“The firm has set its monthly sales target as 10 billion won ($880 million) during the first half of this year, but it has to conduct a thorough analysis of the Korean market and its consumers to reach that goal and to expand its boundaries,” said an industry source who wished to remain anonymous.

“The knowhow learned from other market overseas may not help here since the Korean market is definitely a picky one.”

By Cho Ji-hyun (sharon@heraldcorp.com)