I do a decent amount of shopping online. Not a ton, but a decent amount. And, if I were truly dedicated to maximizing every single points and miles earning opportunity I’d do a bunch of research, figure out which online shopping mall give the best value for my spend and then funnel all my shopping through the appropriate site(s). The reality of is that I simply do not bother. Why not? Because the online malls simply aren’t worth it to me.
Yes, I’m giving up some theoretical number of points. But I like that I don’t have to jump through hoops. And I like that I don’t have to keep track of order status emails and following up with the companies to make sure that I’m actually getting the points I’m due. It is this last bit, actually that inspired my post on the topic. It turns out that these online malls are more like shell games than anything resembling respectable operations, and a recent experience by a few frequent fliers is bearing this out in excruciating detail.
Let us first take a look at how the transaction appears to the consumer:
Seems pretty simple, right? But there is actually a lot more going on in the background.
For starters, there are the affiliate marketing programs that come into play. These are the folks who arrange to manage the data traffic between the merchants and the affiliate marketers. Basically the merchants do not want to manage hundreds of thousands of different partners so they pay a tiny slice of the transaction to the affiliate marketing folks for handling those relationships, including paying out the commission when it is due.
Next up are the affiliate managers. In a few cases this is the loyalty program itself. More often, however, there is a third party involved. For reasons similar to why the merchants don’t want to manage all the folks doing the selling, the loyalty programs do not want to manage the different merchants or even affiliate marketing programs they will be dealing with. So they farm that bit out to someone who takes care of the details. In exchange for a small slice of the action, of course.
And then there are the folks managing the mall technology itself. There are a few major players in this market. SkyMall, Points.com and Cartera are the biggest names; there are a few other smaller players, too. These companies run the websites that are branded with the loyalty program names and logos, ensuring that the systems are running smoothly.
Generally speaking the loyalty programs will strike a deal with a mall operator to run the site for them. That operator may partner with an affiliate management company or they may run that functionality in-house. That group then works with the affiliate marketing company to handle the financial and legal arrangements that allow the malls to operate in compliance with all the affiliate marketing policies. When the time comes to deliver points to the consumer the mall operator will pay the loyalty program the necessary funds to cover the bulk volume of points that need to be delivered to consumers.
So it looks a bit more like this:
It is pretty easy to see how there are so many places where things can go wrong. And things do go wrong with these programs all the time. More often than not it is a few customers who do not get a bonus or something like that. But every now and then a more significant issue comes to light.
A couple weeks ago the American Airlines mall, operated by Cartera Commerce, had an offer posted for 83,000 AAdvantage miles for making a $5 purchase. Never mind that the T&C for that partner clearly excluded the object being advertised from earning any points; the offer was there and a number of people tried to make a go of it. Most anyone looking at that offer would immediately recognize that it was a mistake to have that number listed that way, but many bought anyways, hoping to win big.
The orders shipped, but credit will not be forthcoming. American points the finger at Cartera, saying that fulfillment is their responsibility. Cartera hides behind their T&C, saying that they owe nothing to anyone most likely because, among other things, they won’t actually earn a commission on the sales. And the merchant, Verizon Wireless, ships all the orders anyways, collecting the cash from the consumers. A bit of a mess, but not nearly as crazy as some can be.
A few months ago there was an offer available to earn several thousand miles in either the Hawaiian or US Airways programs for signing up with a web hosting company. The circumstances were somewhat similar to the AA deal in that the number of points promised was wholly out of line with the price of the transaction that would net those points. But the deal was also online for an extended period of time, not just a couple hours. So maybe it wasn’t so crazy. Just like with the AA deal a bunch of folks got in on it, buying the product in hopes of winning big. And I have it on reasonably solid authority that the outstanding mileage liability number has quite a few zeros on it. But no one is willing to actually pay out the miles supposedly earnt.
So who is on the hook for delivering the miles?
Once again, the airlines are pointing the finger at the mall operator. In the case of Hawaiian the operator is FreeCause. In the case of US Airways the operator is SkyMall but they contract out the affiliate management to FreeCause as well. The merchant claims they have no liability because they only pay out cash commissions, not points, and they only pay those on specific types of transactions made under certain terms. I can see the current rules for them as a merchant and this type of transaction would absolutely not qualify, but I have no idea when those rules were last changed. Still, at best the only thing that the merchant can be compelled to pay is the commission to the company that drove the sale.
Sitting smack in the middle of the crosshairs is FreeCause. They are the folks that were responsible for managing the affiliate relationship and understanding the obligations they have for generating the sales and what the commission would be. They also set the bonus numbers based on their expected revenue models. And now they’re the ones claiming "whoopsie" because they messed up.
Of course, stuck in the middle are the consumers. The folks that spent their money, based on marketing offers made under the banner of the loyalty programs, are out the cash and also out the points. And no one is willing to take their calls. Hardly seems fair, right?
This is simply another case of over-promising and under-delivering by the loyalty programs, much like how the airlines love to market regional flights as their own, right up until things go bad, at which point the regional carrier is on the hook. Sure, they can turn around and blame someone else. And legally they’re probably in the right to do so. But that doesn’t excuse the failure to deliver. Especially not when they are using their brand name to generate the sales..
Shame on the airlines for not delivering. Yeah, it will cost them some cash, but they put their name out there and vouched for the legitimacy of these portals. They have to stand up and take the hit when the operations don’t go to plan.
Outsourcing the operations is not carte blanche to outsource responsibility, too. And I just don’t have the energy to pick this fight.
Some additional commentary on the topic from Gary can be found here:
- Mileage Mall Portals, Who Am I Even Dealing With? More Finger Pointing From EasyCGI, US Airways, and FreeCause
- Can You Really Trust Online Mileage Mall Shopping Portals? Or the Biggest Mileage Bonanza Ever, Gone Awry
- 83,000 American Airlines Miles for $5?
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