23 September 2022

‘Just two left! Get in quick!’: misleading online marketing tactics under fire

Buy now or risk missing out... Commerce Commission cracks down on pressure marketing practices.

‘Just two left! Get in quick!’ If you shop online, you’re bound to see these kinds of prompts urging you to buy swiftly. It’s called pressure marketing and in many cases it’s a false representation: You won’t miss out – there are most likely plenty in stock.

Businesses use these unsubstantiated claims to create a sense of urgency among customers who don’t want to miss out on a good deal. The Commerce Commission has been cracking down on these tactics after several businesses have been caught misleading customers into making purchases quickly, for fear of missing out. But in reality, in each instance the business had plenty of stock left and only gave the impression of scarcity to push a sale.

In the latest case, the Commerce Commission has issued a warning to online gift-box retailer Occasion Box, for making false claims that were likely to mislead online shoppers on its website.

This came a week after an online retailer owned by The Warehouse Group was fined $840,000 for promotional claims on its online store. The Commission found that the claims were liable to mislead consumers about how long its daily deals would run for and the quantity of stock available.

1-Day – which now trades under TheMarket – promoted its daily deals ‘for today only’, despite often rolling them over consecutive days.

The Commerce Commission’s general manager of fair trading, Vanessa Horne, said: “We know that Kiwi consumers are increasingly shopping online and rely on claims businesses make on their websites. In many cases, consumers cannot establish for themselves if these claims are accurate.

“Businesses marketing their products in new ways to reach more consumers and generate additional sales still need to understand their obligations under the Fair Trading Act so that they don’t mislead their consumers. Our message is simple: If you can’t back it up, don’t say it.”

What’s the occasion?

Occasion Box sells a range of goody boxes online via its website. One example is the Chocolate Lovers Sharesies Gift Box, which to the naked eye appears to be a packet of Cadbury Favourites and a packet of Cadbury Roses mixed with some Hershey’s Kisses and packaged in a box currently selling for $59.95, marked down from $64.95. You get free shipping if you spend more than $75 on the website.

The Chocolate Lovers Sharesies Gift Box, currently selling for $59.95, marked down from $64.95.

Occasion Box advertises itself as “a small, family-run business that love the art of giving” and it prides itself on excellent customer service.

Occasion Box used ‘sales pops’ (pop-up boxes), purchased from a third-party e-commerce provider, which generated pop-up notifications of fake purchases by fictional consumers, supposedly from various locations around New Zealand. The notifications included links to products sold on the website and wording to say that it was a ‘verified purchase’.

Horne said: “The representations were clearly false and could not be substantiated or verified against the retailer’s sales records, despite claiming to be ‘verified purchases’.”

The claims by Occasion Box reflected a type of misleading conduct that created a false sense of demand and popularity of the goods, she said.

Customers have a tendency to trust that something is good when they see others buying it. These factors can encourage hesitant customers to purchase goods or view the goods others have purchased.

During the investigation process, Occasion Box explained that the purpose of sales pops on its website was “making people that have never landed on our site before or heard of the brand more comfortable that other customers not only exist but are actively purchasing goods from us”. During the investigation, Occasion Box acknowledged that the sales pops were “NOT reading legitimate customer data from our sales records” and failed to provide information and/or documents that demonstrated reasonable grounds for the sales pops notifications. Occasion Box deactivated sales pops in November 2021, upon being informed by the Commerce Commission of the investigation.

In the Commission’s view, the conduct is likely to have breached sections 10 and 12A of the Fair Trading Act.

“We hope this warning serves as a reminder to the business and other small businesses that as they explore new, innovative ways to market their products, they understand and comply with their obligations under the Fair Trading Act,” Horne said.

Today only ... but not really

In the case of 1-Day, the promotion of ‘today only’ or ‘daily deals’ and use of a countdown timer between 2016 and 2020 gave the impression that goods were available at an indicated price for a limited time, and a 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.

It was prosecuted and fined $840,000. The judge in this case referred to the misleading conduct as ‘wilful’ and noted that it prevented effective competition.

Social proof

The Commission is cracking down on pricing and promotional activities because of the strong influence they can have on consumer purchasing decisions.

Research indicates that using social proof, such as representations that other consumers have recently purchased goods from a trader, increases the amount of trust that consumers have in the trader, and increases the trader’s credibility, which in turn increases the likelihood of them purchasing from the trader. Essentially, they are used as a tool that can help a business convert more website visitors into customers.

This form of social proof works because consumers tend to trust something is good when they see others buying it. This creates a sense of popularity and sends a signal to visitors that people both like and trust the relevant product/brand.

While social proof techniques can be used legitimately, representations about other consumers purchasing from a trader are likely to breach the Fair Trading Act if the representations are not accurate.

Our key message to businesses making claims such as ‘limited stock’, ‘selling fast’, or that a person has just purchased something, is this: make sure that you can substantiate – that is, back-up – the claims that you are making. In an online environment, it is hard, if not impossible, for a consumer to verify such claims and if the claims cannot be supported, you will breach the Fair Trading Act.

What to look out for

The Commission encourages consumers to pause before making an online purchase.

‘Some claims make you feel like you need to make a quick decision,” it said. “Take a moment to think about the purchase, whether you can make the purchase later, or shop around. Businesses must give you clear, accurate and unambiguous information that can be backed up.”

The Commission has also published new guidance on its website about misleading online sales practices to assist both businesses in understanding what claims may breach the Fair Trading Act, as well as helping consumers know what to look out for when shopping online. You can read it here.

You can make a complaint about misleading or unsubstantiated claims about the availability or popularity of goods or services here.

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