There are better managed companies in the Deals Industry.

There are better managed companies in the Deals Industry.

Over the past month the attention given to the Canadian Deals & Coupons space has primarily been about Teambuy’s bankruptcy protection and it’s acquisition by nCrowd. Over the same time period, story lines from media, bloggers, social chatter, etc have primarily been about how much money merchants will lose due to Dealfind and Teambuy’s bankruptcy protection, the potential customer losses incurred and bringing into question the entire industry model of Deal Marketing.

The fact is that Retailers and eCommerce companies go Bankrupt every month and suppliers and consumers lose what is owed to them. It is a shame that there are not enough protections to ensure repayment to suppliers and consumers. it is a shame that creditor accounts are not protected better by management. It is no different in this industry. It is a shame, but it is no different. Any company can declare bankruptcy protection and re-organize themselves financially in order to reduce or better manage claims from creditors.

In the case of Dealfind/Teambuy, bankruptcy helped clear debts and pave the way to an acquisition. Bankruptcy was used as a strategy for acquisition and not a way to simply manage financial obligations better. Merchants, more than anyone else, of Teambuy/Dealfind, unfortunately got shafted. Although a $20 credit to a consumer is not a lot to lose, $40,000 in merchant payments is significant to a small business that worked with Teambuy.

Due to the overwhelmingly negative press surrounding Dealfind a couple of years ago and Teambuy this year, the deals industry in Canada has received a black eye, no doubt about it.

 

BETTER MANAGED COMPANIES EXIST IN THIS SECTOR

Here’s the message that we would like to get across to media, to merchants and consumers: Just because one or two companies manage to operate their business in a way that is undesirable does not mean the entire industry or other companies in that industry are undesirable as well. Far from it.

To use an analogy from other sectors; just because Chrysler had serious problems and went bankrupt does not mean that Ford is a bad company as well. Ford has proven to be a fabulously run company. Just because certain eCommerce companies are poorly run or go bankrupt does not mean all other eCommerce companies are the same. That is simply not a fair association. Dealfind/Teambuy does not an industry make.

There are fabulously run companies in the Deals sector in Canada that do not operate in the manner that Dealfind or Teambuy did. These companies do NOT get the attention they deserve from general media or from business media, but they should. We have decided to highlight some of these well run companies. Their successes and stories are seldom written about across the country and especially not in National media that comes out of Toronto. Given that both Dealfind and Teambuy have been from Toronto, it is reasonable why the National Media in Toronto would typically associate the Deals Industry with the negative circumstances surrounding Teambuy and Dealfind. The industry has, in fact, examples of better run companies and we encourage national media like CTV, CBC, The Globe & Mail, National Post, and others to seek those examples out and not automatically align the entire industry to a handful of bad eggs. If you are a journalist reading this and would like a broader view of the industry, then contact us, we will be glad to provide you with industry information.

So who are these well run companies?

We will highlight one specific company in this article and others in future articles. In fact, we will make a commitment to provide the industry, media, merchants and consumers with far more positive aspects of this industry and case studies on how merchants are benefiting greatly from such services instead of focusing on the negative distractions of companies who have not operated their business properly.

 

AN EXAMPLE OF A BETTER MANAGED COMPANY

We have been given incredible insider access to the following company’s operations and financials. While we will obviously not disclose any confidential details, we will provide information that is very relevant to the present day discussion of the industry.

The company we would like to highlight in this article is TUANGO.

tuango

Is what we write here to be considered an endorsement of Tuango, is it a recommendation to merchants and consumers to actually use Tuango? You bet it is!

As the Deals & Coupon industry’s association, we are very strict on who we recommend to merchants and consumers. We rarely provide recommendations. When we do, it is because of our confidence in that recommendation after much thought and evaluation. In this case, it is very appropriate for us to recommend Tuango.

 

What follows is information that is relevant to this discussion:

  • Unlike Dealfind in the past and Teambuy this year, Tuango is a profitable business. Their focus is not on hyper growth at all costs. Rather, it is profitable growth while ensuring their service is valuable to Merchants and consumers they have built relationships with.
  • Tuango has garnered an exceptional reputation across Quebec because they invest heavily in quality across their organization, be it customer service, merchant services, product selection or merchant repayments. In the 4-5 years we have tracked this industry, it is very rare for our association to receive any complaints from merchants or consumers about Tuango.
  • Tuango has a merchant sales methodology, when used properly, provides merchants with a path to leveraging “Deal Marketing” as a valuable method of profitably acquiring customers and marketing the business. Bottom line, Deal marketing is a powerful marketing method where merchants can absolutely drive both customer acquisition and profitability…..when done right. If merchants are having difficulties in determining a profitable strategy with other Deal Providers, then contact Tuango to discuss the details.
  • Did you know that Tuango co-founders and CEOs Eduardo Mandri and Jérôme Guidollet were selected as winners of the 2013 Quebec EY Entrepreneur of the Year in the Emerging Entrepreneurs category? The simple fact is that absolutely no media outside Quebec even bothered to mention this positive news last year. Ernst & Young honoured Tuango with this award as an example of a well run and growing business in the Deals/eCommerce sector. Yet it went ignored by media writing about the industry, only focusing on the negatives surrounding the industry, 75% of the time surrounded Dealfnd over the past 2 years and Teambuy at the present moment.
  • Now that Teambuy has been purchased by nCrowd, it will change the front runners in the Deal space in Canada. Last year, Groupon was #1, Teambuy #2 in terms of billings. This year it will most likely be Groupon #1 with Tuango #2 and nCrowd a close #3 , then Wagjag #4 in terms of Billings. Tuango’s ranking is impressive purely on the fact that Tuango’s billings are primarily only from Quebec! (Ottawa as well) Whereas the other Deal Providers sell across the country (Wagjag does not sell in Quebec).
  • The most important aspect and the one area that stands out in Tuango’s financials that we wish to highlight is the account to which all merchants payments are accumulated. This account is a separate account and is not touched by Tuango to operate other parts of their business. This money BELONGS to merchants and is treated as liability to be owed and not part of cash flow to be used for other expenses. Here is why this is important:
    • In the Deals industry, Consumers buy Merchant services/products directly from the Deal Provider and not the Merchant. Deal Providers act as a reseller for Merchants. For their work at finding and selling to the consumer, the Deal Provider receives a commission on the sale. Anywhere from 15-40% depending on the merchant, depending on what is being sold, etc. As such, Deal Providers collect revenues from consumers on behalf of merchants. There are then two payment streams: The commission to the Deal Provider and the Revenues to the Merchant. These revenues need to be transferred to the merchant by the Deal Provider and are usually transferred over a period of time to address returns, chargebacks, etc. What is important to understand is that these revenues to merchants that Deal Providers collect DO NOT BELONG TO THE DEAL PROVIDER. They belong to the merchant.
    • Any Deal Provider collecting this merchant money and using it as cash flow to operate their business is skating on very dangerous ice. There are several in this industry who still do this and thus delay merchant payments to when they have enough cash flow to cover what is owed. That is not a responsible or financially safe manner to operate a business. If anything happens to the Deal Provider’s business, like poor sales in a given period, or bankruptcy, then monies belonging to the merchant would not be available to be paid back. Meanwhile many merchants probably already incurred expenses delivering the service or product and would be operating at a loss if those monies were not distributed to them… which is exactly what occurred with the Teambuy Bankruptcy protection.
    • It needs to be repeated: the money Deal Providers collect on behalf of the merchant does NOT belong to the Deal Provider. It is owed to the merchant and seeing how Tuango operates this account should satisfy merchants as to how their payments are being managed.
    • In fact, as an industry association, we would certainly like to see such accounts being mandatory for all Deal Providers to have. The merchant monies placed in these accounts should probably be placed with an escrow service in order to ensure more guarantees to the Merchant community that merchants will be paid regardless of what occurs with the Deal Provider’s business. At this point it is up to each provider to provide guarantees and comfort levels to merchants they deal with. So far, governmental bodies, provincial or federal, have not mandated such protections. Our advice to merchants across Canada, ask your Deal Providers how merchant monies are managed.

 

This article is not about how a company like Tuango operates and what they do to manage their business. Instead, it is about the fact that companies like Tuango actually do exist in this industry and that they should not be overshadowed by media who only write about other companies that are poorly run and give the industry a bad name.

There are plenty of poorly managed eCommerce companies in Canada, but writing about the eCommerce industry with only that frame of mind does a disservice to those companies that are succeeding and providing a valuable and quality service to the industry and to their customers. Such is the case in the Deals industry in Canada and such is the case as highlighted by Tuango.

As with any other form of marketing, advertising or service used by Merchants, said merchants should work with companies that have built a reputation of trust and quality over the years and evaluate those that have not with more attention and risk analysis.

More positive news to come.

The Canadian Deals & Coupons Association.