With e-commerce services on the rise in Southeast Asia, is there a need for better regulation of deal prices and surcharges?
The article has been updated with additional clarifications from Cash Cash Pinoy Co-founder and CEO Frederic Levy.
Mobile and online commerce are promising industries in 2014 in Southeast Asia, where a reported US$638 million in investments were infused into m-commerce, daily deal companies and startups in 2013 alone. In the region, major players include Rakuten, Rocket Internet, Qoo10, Groupon, Living Social, Naspers, and the like, which are actively growing their platforms. Just this week, e-commerce giant eBay and its India-based contemporary Snapdeal are finalising a US$133.77 million deal.
In the Philippines, popular players in the deals industry include Living Social (Ensogo), MetroDeal and Cash Cash Pinoy. The country is also no stranger to Rocket’s Lazada and Zalora, which are go-to sites when it comes to gadgets and apparel, respectively. When it comes to buying travel packages and other services, there are the deals from Ensogo and Cash Cash Pinoy.
With aggressive marketing and pricing, one might wonder about the intricacies of the deals involved. Are the deals cheaper because the service can command a certain volume? Are companies downplaying the price of the deal only to recoup the discount after? Who should be responsible for clearing any inconsistency or misunderstanding?
e27 has had the chance to have a deeper look into the intricacies of the deals industry, particularly in the Philippines. In 2013, the editorial staff interviewed Frederic Levy, Co-founder and CEO, Cash Cash Pinoy, about the company’s pivot from services to products. Levy also expounded on how the deals market operates on razor-thin profit margins; hence, the need to keep a “startup mentality” even as a company grows.
The difficulty with deals
In the recent weeks, Cash Cash Pinoy was subject to some controversy over a supposed “scam” or “scandal” arising from differences in advertised travel rates vis-a-vis the actual travel cost. While a typical travel package includes airfare and hotel or resort accommodation, a traveler would incur additional fees levied by budget airlines or immigration, which include fuel surcharges, travel taxes and sometimes even visa fees, where applicable.
Art Ilano, Professor, University of the Philippines – Diliman, and technology author, points out the potentially deceptive trade practice in pushing a deal that is “up to 54 per cent off” but whose surcharges actually reach an amount greater than the promo price. “We would understand additional fees of just 3000 pesos, or 5000 pesos, or even at most 12,000 pesos. But for the additional fees to be even more than the voucher value!”
Ilano says out that he made a purchase for two vouchers (the minimum purchase) at cost of PhP 41,976 for a Tokyo tour package. Upon calling the travel agency to make the actual booking, the surcharge alone turned out to be a total of PhP 43,496, an amount even bigger than the original price. “For CashCashPinoy to be offering a deal like this, where the additional fees are even greater than the voucher price, makes them a willing accomplice to what is essentially a bait-and-switch tactic,” he says.
The concern here is that surcharges can be unpredictable, something that deal companies are aware of. In an interview with e27, Levy shares the company exercises due diligence in the deals it publishes, and each one of these is given a permit by the Philippines’ Department of Trade and Industry (DTI). “We check everything we are selling — each separate item. We have special contracted rates with airlines also,” he adds. However, they cannot include the exact amount of surcharges, as these vary depending on the season.
“We don’t know the exact amount of the surcharge, special holidays, or long weekends,” says Levy, who explained that the service actually indicates vouchers are exclusive of surcharges. “[W]e do not hide what isn’t included in small print, but all details are explicitly listed and easily found on the site. We even use a contrast-rich button to call out further details,” he wrote in a letter to TechNoodling, where Ilano originally aired out his complaint.
Levy shares with the e27 that the booking was made for April, considered peak season due to the Philippines Holy Week holidays, which also included visa assistance. Were this not the case, the surcharges would only amount to PhP 22,400 in all, or PhP 11,200 per person.
Levy further clarifies that both original and discounted price are actually exclusive of these surcharges. “For each deal, the Original Price that we introduce as the benchmark price is computed based on the published rates, and doesn’t include all surcharges, administrative fees and other taxes,” he says. “Exactly like our CashCashPinoy price: both prices don’t include all surcharges, administrative fees and other taxes, so the consumer can compare the two prices without any doubt of the quality of the discount.”
Ilano tells e27 that the surprise came with the proportion of the surcharge, which he considered a hidden cost. “Yes, the voucher explicitly stated what was excluded,” he said. “But who would have expected that the added fees would actually be bigger than the voucher price?”
Ilano clarifies that he believes it may not have been Cash Cash Pinoy’s intention to deceive, but the system in place might encourage such a possibility, either on the part of sales agents, travel companies or other stakeholders. “The company may not have intent to deceive. But its systems encourage account agents to create deals designed to confuse or fool the public,” he adds.
As per Ilano, he would’ve accepted this possibility and just let it go. However, upon requesting a refund, he was initially told it was against company policy. “What ticked me off was CCP’s refusal to refund. They were forcing me to take a raw deal,” he says, citing the Philippines Republic Act 7394, or the Consumer Act, which prohibits “no return, no exchange” policies, in saying he should have been refunded because of the difference in the advertised price with the actual cost of the travel package.
Levy clarifies, however, that, as of this article’s publishing, the company has refunded the purchase. “Our goal at the end of the day is to offer our customers the real deal and ensure that we come to a reasonable agreement if issues arise,” he shares. “In fact, we have refunded unsatisfied customers and have also ended relationships with partner merchants for delivering unsatisfactory products. In this case, the customer, Mr. Ilano, has been refunded by CashCashPinoy.”
Who is responsible for regulating deals, then?
In the Philippines, it is the DTI that regulates promotions and deals. However, the concern is whether the agency has enough resources to deal with complaints about discounted products and services. Ilano has shared links to review sites and community pages that discuss the marketing practices of deal sites like Cash Cash Pinoy. Some point out irregularities in the deal price, such as claiming products are valued at a higher price, when these can be bought for almost the same price at retail establishments. The department is likely to be understaffed and overworked, Ilano shares.
Levy stresses the due diligence done by the Cash Cash Pinoy team, however. “All our promos are checked in details by our team to guarantee to all our members the reality of the discount,” he tells e27. “CCP has never been fined by DTI for malpractice or misleading promos. We have daily contacts with the DTI, and our perception is not at all that the governmental agency is understaffed and overworked.”
In the end, Cash Cash Pinoy’s Levy shares that the company is not in the business of hurting the consumer. “We at CashCashPinoy live and breathe customer satisfaction and are always open to communication and dialogue,” he said, adding, “We only earn from what we sell.” He adds that the company’s deals have enabled 2500 to 3000 Filipinos to travel monthly, when travel would otherwise be too expensive without discounted packages. In addition, the company sells more than 40,000 deals monthly. “In 2013, we had less than 0.1% complaints and 97% of our members would recommend CCP to their friends and family,” Levy shares.
If there is a lesson learned here, it’s that with social media, the consumer is starting to take charge of the feedback mechanism, evident with review pages on Facebook and blog posts on consumer advocacy sites. Still, there is a need for a stronger consumer advocacy, claims Ilano, which will be necessary in the midst of a growing e-commerce and m-commerce industry.