Feb. 21, 2012 at 6:11 AM ET
When you buy an online coupon, how do you know a store will honor it?
Edgar Dworsky walked into Rose's Chinese Restaurant in Waltham, Mass., last week with a $6 coupon he’d purchased for $3 and found out the hard way that not everything is what it seems online.
The online coupon category is getting more crowded daily. Led by giants Groupon and Living Social, there are now hundreds of smaller competitors. But not every email offering a discount is a good deal.
Dworsky purchased his coupon from MobileSpinach.com in early February. But when he went into Rose’s, the owner said he’d never heard of MobileSpinach and didn’t plan to honor it. Instead of enjoying a cheap meal, Dworsky found himself in the middle of the messy world of online merchant discounts.
Dworsky’s tale isn’t unique. Many store owners around the country say they’ve never agreed to accept coupons being offered for sale on MobileSpinach, and the firm has been dogged by nationwide complaints that it is selling allegedly “fake” coupons.
The firm’s co-owner, John Vitti, blames the complaints on misunderstandings, poor memories of merchants and over-eager affiliate salespeople, and says he’s happy to issue refunds. But merchants getting pitched daily by ever-increasing number of Groupon-like sites are often caught in the middle, completely confused by the complicated world of e-coupons.
Dworsky was equally frustrated when he tried to use his coupon on Feb. 11.
“The man at the counter, the owner, said he didn't know what this certificate was, that he never agreed to offer these certificates, and that he had not been paid for them. He indicated that someone had come in the day before with one like it also," Dworsky said.
And while MobileSpinach later agreed to refund the $3 he'd spent on the coupon, he wasn't really satisfied. Calls placed to other nearby restaurants unearthed a similar pattern.
"This is a scam of sorts ... or a naive company that thinks they can advertise deals that they have not yet formally acquired," said Dworsky, a former assistant attorney general in Massachusetts who now runs the consumer advocate website MousePrint.org.
Indeed, MobileSpinach has previously been accused of selling deals it didn't really have the right to sell. Last August, San Francisco-area foodie magazine Grubstreet wrote two stories about restaurants and consumers getting tripped up by Mobile Spinach group coupons that weren't authorized. In November, a student newspaper at George Washington University reported the same problemin the Washington, D.C., area. The paper said 50 disappointed consumers were turned away from a small restaurant called Crepaway with invalid $10 vouchers they'd purchased from Mobile Spinach for $5.
Other unusual stories dog Mobile Spinach. Jim Gilbride, who owns Old Country Deli in Hicksville, N.Y., told msnbc.com that a caller recently offered him an opportunity to buy a Mobile Spinach ad. He declined, and was surprised when the ad showed up on MobileSpinach.com anyway.
"I never heard him say (the ad would go up anyway)," Gilbride said. "I dismissed him when he called."
A man who answered the phone at Kabob Corner in Medford, Mass., said the same thing about a $3 for $6 coupon offered for that store.
"It is a fake coupon," he told msnbc.com before hanging up.
Even merchants who have dealt with Mobile Spinach seem to face some confusion.
At Creative Cakes in Silver Spring, Md., owner Randi Goldman said she agreed to a $5 for $10 in merchandise deal with Mobile Spinach about six months ago. She generally feels pestered by sites like Groupon and Living Social, and doesn't like the revenue split they offer -- merchants only pocket 25 cents for every dollar in value that is sold. But her Mobile Spinach salesman said she'd earn 100 cents on the dollar for every coupon sold.
"They said they'd pay me $5 for every coupon, and there was a special deal with the credit card companies who would pay the other $5," Goldman said. So far, only a few coupons have been redeemed and her PayPal account has been credited the funds, she said.
Vitti, the co-founder of Mobile Spinach, admits that there have been some customer service issues, but blames them on confusion in the coupon marketplace.
"This space is getting crowded," he said. "There's just so much confusion. Sometimes merchants don't remember what they've agreed to."
That's his explanation for Dworsky's issue at the Chinese restaurant.
“I personally had a conversation with the owner of Rose's Chinese Restaurant and he apologizes for this confusion and so do we,” he said.
A worker who answered the phone at Rose’s said the owner wasn’t present and declined to comment.
Vitti said the rash of San Francisco complaints was the result of a short-term experiment that involved offering deals for sale before they'd been arranged with a merchant. The company later ditched the idea, he said.
He attributed the Washington, D.C.,-area complaints to rogue affiliates. Some deals on MobileSpinach.com weren't arranged directly by the Mobile Spinach sales team, but rather by affiliates in a revenue-sharing arrangement.
"There was confusion because the only way to redeem those was for people to make purchases online, and they were walking into the store with those," he said. "Over time we were getting more and more customer support issues, to a point where we are uncomfortable with them. Sometimes these aggregators and deal providers don't have best relationships (with merchants). ... Sometimes you wondered, ‘Who's got the relationship here?' "
So as of Feb. 4, he said, Mobile Spinach has stopped dealing with affiliates and will only promote deals sold directly by its sales force. The number of deals being offered dropped from "thousands to about 400" as a result, he said.
"We are trying to clean up this industry," he said. “There has been many well documented problems in the coupon, gift card and now the deal space with redemption at any size merchant ... even large national retailers.”
He said the full value offer to Creative Cakes was real – “customer acquisition costs,” he said – but added that it is only temporary.
Consumers who feel they've purchased a bad deal from Mobile Spinach should contact the firm for a refund, he said. "We have a refund-anytime, no-questions-asked policy," he said.
Merchants, however, face a slightly trickier proposition. They can refuse to honor any coupon, but that risks irritating a potential customer. Gilbride, the deli owner, said he'd probably honor a coupon brought in by a frequent customer just to avoid a negative interaction.
”I've been in this business 26 years now," he said. "I try not to get frustrated anymore by any of this."
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