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Patrick Goldstein and James Rainey
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Groupon CEO apologizes for late, paltry New Year's meals

January 17, 2011 |  5:00 pm

GrouponAndrewMason The online social buying site Groupon has been big in the news in recent days — first when it turned down a $6-billion offer from Google, then with news that it had raised nearly $1 billion from big investors.

The company's furious growth rate, though, has led to some missteps and blowback among small-business people and customers who use the service. Groupon got a big black eye when a restaurant in Japan — overwhelmed by customers wielding its half-off coupons — could not live up to a bargain meal for the cherished New Year's feast known as “osechi.”

Customers of the Bird Cafe got meals that were paltry, haphazardly thrown together or late. That hardly lived up to the Japanese tradition for osechi, when the Japanese expect a lavish spread of great variety. Many of the sumptuous offers are ritualistic — believed to bring good luck for the New Year.

Customers paid about $128 through for the meals, half off the regular price, but felt cheated when the Yokohama-based cafe delivered meals that only scarcely resembled what had been promised. Their complaints created an online sensation and a news story in Japan, then it was reported in the Wall Street Journal.

Some American businesses have also described being overwhelmed when they signed up with Groupon. The online discount company typically splits the reduced payment with the businesses, which provide all of the goods and services.

Now Groupon founder and chief executive Andrew Mason has posted a video Monday apologizing to the Japanese customers who had their New Year's celebrations dampered. He said Groupon had already issued refunds and bonus coupons to those disappointed customers.

“We created Groupon to help enrich people’s lives by bringing new, exciting  experiences to them," Mason says. "So when we do the opposte as we have in this case, it really hurts.”

Mason adds that the company is intent on preventing such problems. Groupon already has "capacity planning" in the U.S. and many other countries to help small businesses contend with the rush of new customers the coupons can bring. The planning will now be extended to every new nation that Groupon expands into, he promised.

“Groupon is in kind of uncharted territory," Mason adds. "We are on the forefront of figuring out how to bring local commerce to the Internet. And as we do that we’re going to hit bumps in the road. We’ve made mistakes before, and we will make mistakes again.”

But he pledges that the company will do everything in its power to make sure the same mistake doesn't happen twice.

News of the osechi furor and Mason's video touched off a debate on Internet chat sites. Some praised the CEO for his mea culpa and pledge to do better. Others said Groupon's mass buys inherently create a problem. Skeptics predicted the 2-year-old company's next-big-thing glow could soon dim.

The president of the restaurant management company that stumbled with the New Year's deal took an even more dramatic step to show his contrition. He resigned.

— James Rainey

Twitter: latimesrainey

Photo: Andrew Mason is CEO and founder of Groupon, the rapidly growing online coupon provider.  Mason apologized to Japanese customers Monday for a New Year's deal gone wrong that highlighted the difficulties the company faces in managing its global expansion. Credit: Nati Harnik / Associated Press