The Auckland District Court has hit online retailer 1-day.co.nz with a near record fine for misleadingly advertising ‘today only’ discounts, but its owner The Warehouse Group is sorry, not sorry
Comment: Yesterday morning, website 1-day was ruled to have pressured potential purchasers into snap decisions. Last night, the company was doing much the same thing again.
1-day was first set up as a daily discount deals merchant. According to the story it tells online, founder Luke Howard-Willis was returning from an unsuccessful business trip to China. “The legend is that, on his Air NZ flight home, Luke scribbled down his idea on a napkin. While brainstorming, it came to him. Why not avoid making a big shopping website, and instead just sell thousands of one item in a single day?”
The site went live in 2007, and according to 1-day’s own account, its turnover quickly grew to $2 million a week. It promoted its daily deals “for today only” but according to the Commerce Commission, it began rolling over the deals for consecutive days. That continued until 2020, when the commission cracked down.
The online store was also programmed to progressively reduce the quantity of stock displayed as available throughout the day, meaning consumers were often not seeing accurate information about the stock available or how long the offer would be available.
1-day was part of the Torpedo7 retail chain, which was acquired by The Warehouse Group in 2013. The online store now trades as part of TheMarket site, but it still has its own 1-day.co.nz Facebook and Instagram pagers, offering its so-called 1-day deals.
The company was sentenced for misleading promotions on Wednesday. Auckland District Court Judge Peter Winter said its sales technique was to pressure potential purchasers into making a snap or quick decision, in the face of a 24-hour deadline and a diminishing supply of the advertised products.
“The misleading conduct was therefore a central plank of the defendant’s business strategy,” he said. “Given the lengthy period over which the defendant’s offending occurred, the nature of the offending which involved a two-pronged pressure misrepresentation of limited time to purchase and limited stock availability as well as the background guidance and experience of the company, I find the defendant’s offending was more than careless. The defendant’s offending was wilful.”
He said 1-day’s conduct gave it an unfair advantage in the marketplace over its competitors who did not employ pressure-selling techniques.
Earlier this week, 1-day advertised deals on its Facebook page such as Adidas sunglasses for $99.99, and for 3SixFive punching bags for $179.99 – both of which (if one followed the link) were still available last night on themarket.com at the same advertised “1-day” price.
But Warehouse Group corporate affairs lead Jordan Schuler said 1-day was no longer about daily deals available for 24 hours. “These are value prices available at all times.”
1day.co.nz now sat under the ‘hot offers’ section on TheMarket.com, she said. The misleading promotions were prior to 1-day becoming part of TheMarket.com, and prior to The Warehouse buying the company.
In a statement she said: “We take our obligations under the Fair Trading Act seriously and accept the charges relating to legacy features of the 1-day website. The implementation of these features was prior to our ownership, and these features were corrected after they were raised by the Commerce Commission.”
And certainly, the court judgment was against the misleading use of the phrase “today only” rather than “1-day”. The question is whether the ongoing use of “1-day” is materially different from the original “today only” deals.
Vanessa Horne, the Commerce Commission’s general manager of fair trading, said the promotion of daily deals and use of a countdown timer between 2016 and 2020 gave the impression that goods were available for a limited time and the stock-level indicator gave the impression that stock was running out.
“In fact, often neither of these things were true, and on many occasions the goods were available at the same price the next day,” she said last night.
“In a physical store, we wouldn’t expect a retailer to say there’s one item left, when a number of items remain on the shelf or in the stockroom. The same goes for online – any representation about available stock needs to be truthful.”
The Commission has published new guidance on its website about misleading online sales practices, which can be read here.