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Will government regulation be a deal breaker for group discount sites?

Cobone group discount site

As the Dubai Department of Economic Development turns its attention to group discount sites, companies and customers hope for a fair deal.

July 3, 2012 5:47 by

The (DED) is at it again. After cracking down on dubious discount sales at malls, the government body is now scrutinizing daily deal websites in the UAE. Group discount sites and daily deal companies such as, Groupon and Living Social might have to fall in line with DED’s new plan to regulate this fast growing sector.

The problem of regulating these businesses stems from the fact that the DED has not been able to categorize these services into any particular type of retail business. These websites offer everything from leisure trip deals to discounts on spa services to even hobby classes. Also, there’s no physical store, so to speak, so these website owners say it’s not fair for the DED to apply the same rules to them, as other companies in the retail sector.

The government body has turned its attention to these businesses after witnessing their meteoric rise in terms of visibility and revenues. Cobone, one of the daily discount deal players in the market claims to have a customer base of 1.5 million members and over $53 million dollars in savings just from the MENA region. Now that’s a fetching report for a business that’s been around in the country for just two years.

Makes us think then, are other retailers bearing the brunt of the daily deal mania? Is the DED also under pressure from other full price retailers crying foul?

While the DED says there have been complaints from customers about malpractices in this sector, the government body is grappling to monitor and regulate these sites.  Due to the large volume of daily deals on each of these sites, the DED may have to employ a separate team only to monitor and approve material from these sites.

Moreover, the pulse of these daily deal businesses depends on speed, with deals that sometimes go off the table within minutes after going online. These companies fear that government monitoring and regulation will adversely affect the timeliness and effectiveness of their businesses.

On the other hand, government regulation could also be a blessing in disguise for these companies that are often seen fighting neck to neck, in the discount game. The cut-throat competition could use a referee to ensure fair gameplay. But until the DED announces a comprehensive plan for this business, these companies will be on the edge of their seats, hoping not to be handed a raw deal.

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