• Report: #145118

Complaint Review: Storesonline, Inc Imergent, Inc Galaxy Mall, Inc

  • Submitted: Sun, June 05, 2005
  • Updated: Sun, June 05, 2005

  • Reported By:Melbourne Australia
Storesonline, Inc Imergent, Inc Galaxy Mall, Inc
754 E. Technology Avenue, Orem, Utah Orem, Utah U.S.A.

Storesonline - Imergent - Galaxy Mall RIPOFF! Warn Australians, under investigation, fail to deliver, misrepresentation, Orem Utah
Rip-Off Report Investigation: shows that StoresOnline & iMergent is fulfilling its commitment to provide excellent customer service. Rip-off Report gives StoresOnline a POSITIVE rating in customer support and quality assurance. StoresOnline pledges to resolve complaints and address any issues from the past, present and in the future - committed to 100% satisfaction - whatever it takes say company executives.

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I attended the Introduction and Workshop run by Storesonline (SOL) on 3rd June 2005 at the Park Hyatt in Melbourne.

Having carried out a review of a range of a range of information available in the public arena and information provided by SOL in the Introduction and Workshop, I have serious concerns about the integrity of the organization, its management and staff, the ability of the organisation to deliver on the promises of its sales staff including being able to deliver a functional product, provide support and servicing as promised, and the ability of the organisation to resolve complaints and disputes. I would strongly warn any person against entering into business arrangements with SOL, its parent Imergent, or any of its related entities.

I have provided the following summary which supports this conclusion.

Review of unaudited quarterly report for period ending March 31, 2005:

http://www.imergentinc.com/press/2004-11-05.html - investor relations tab, or:
http://www.imergentinc.com/form10-q/10-Q03-31-05.pdf

The company is highly profitable, to for the 9 months ending March 31, 2005 the company made $64,224,660 gross profit, and the three months ended March 31, 2005 $24,227,956.

A press report available on Imergent's website states the following:

Robert Lewis, chief financial officer, stated, "Building on the strength of our previous quarter, we delivered increased cash flow from operations in the fiscal third quarter 2005 of $5.1 million, our highest level ever, and our cash balance rose to $12.2 million. We continue to leverage our business model and drive efficiencies and productivity, as operating income as a percentage of revenue increased to 16 percent for the quarter from 13 percent in the fiscal second quarter 2005. Profitability was also boosted by an increase in gross margin as a percent of revenue, which improved to 79 percent for the quarter compared to 73 percent in the fiscal second quarter 2005."

Operating costs are detailed on page 6 of the Quarterly Report. Robert Lewis is indeed correct in stating the above that operating income as a percentage of revenue has increased. My concern is that the efficiencies and increases in productivity have been made at the expense of providing adequate levels of customer support and assistance.

Adequate support
While large profits are good news for shareholders the same may not always be true for customers.

The nature of complaints reviewed below in this report identifies one of the major areas of customer dissatisfaction is in the area of sales and support. This includes non-response to customer enquiries, slow responses, unhelpful responses, administrative errors and provision of incorrect advice.

These types of complaints are indicative of companies who do not adequately resource their servicing and support functions. For example, support staff may not have the adequate levels of training or experience, and a suitable number of support staff may not be available to address the volume of customer enquiries.

Further it is noted that Imergent raised its full year fiscal 2005 revenue growth outlook to around 40 percent over fiscal 2004. Previous outlook had been for 30 percent to 35 percent revenue growth in fiscal 2005.

This rapid, and to some degree unanticipated, growth also raises questions as what Imergent have done and continue to do to ensure customers are receiving adequate Information Technology (IT) support and what additional costs are budgeted for provision of IT support.

Page 6 of the annual report details a category of expense as general and administrative' expense, which is $3,087,562 for the three month period ending March 31, 2005. The note on page 21 states that the same figure for the nine month period ending March 31, 2005 has increased due to increase in salaries and fringe benefits from hiring additional staff to support increased business activity. This note does not detail whether the staff employed are additional IT staff appointed to handle the chat line and additional IT customer service staff or whether they are back office accounting and processing staff, or sales and marketing staff.

The company is either operating remarkably efficiently or they are under-resourced in their IT support and servicing function. I question whether the thousands of contracts Imergent must support can be adequately serviced from an IT perspective by paying some component of an already low figure of $3,087,562. Note this figure must also cater for payment of increasing legal fees incurred and accrued for the defence of certain legal actions against the company.

For the 9 month period ending March, 31, 2005 the figure $7,324,085 appears very low for a company which will probably come close to an annual revenue figure of $90 million for the full 2004-2005 year. How many new customers are generated as part of the $90m revenue? And how many existing customers must be supported since incorporation in 1995?

Under the heading (g) Revenue Recognition' on page 11 of the Quarterly Report the company discloses that in 2000 they started selling a license to use a new online product called StoresOnline Software (SOS). The SOS is a web based software product that enables the customer to develop their Internet website without additional assistance from the company. A CD-Rom containing a licence and password and instructions that allow immediate access to the Company's website where all the necessary software programs and tools are located to complete the construction of the customer's website.

The Introduction and Workshop sales staff advise that all the necessary support is provided through the SOL chat line, email and telephone and will enable customers to build functional websites. The SOL sales staff advise that their support staff will build the customer's site and sample websites can be provided to the support staff by the customer to ensure the desired look and feel' is obtained.

The statement on page 12 of the Quarterly report seems to contradict the above advise provided by the sales staff at the Introduction and Workshop events.

Further is it alarming to read the fifth paragraph on page 12 of the Quarterly report stating the following:
Through third-party telemarketing sales following a workshop, certain products intended to assist the customer in being successful with their business are offered. These products are fulfilled by third-parties and include mentoring, coaching, professional services, a live chat capability for the customer's own website and web traffic services.

No reference is made to paying any additional fees for these services during the Introduction and Workshop, and the clear impression is this advice is able to be obtained by dealing with the servicing and support staff.

The sixth paragraph on page 12 of the Quarterly Report discuss revenues from running courses on how to successfully sell through online auctions (eBay) and the utilisation of the online functionality of the Storesonline software. No reference is made to these courses during the Introduction and Workshop, and the clear impression is that this is an automatic function that is easily triggered allowing all of your products to be sold at the push of a button on eBay.

Chat Line
A basic demonstration of the Chat Line is provided at the Introduction and Workshop. The presenter logs on to the chat line and the support staff member in the US types in hi at the presenters request. While this demonstrates that the chat line appears to connect to an actual person it does not provide any information as to the level or degree of interactions and responses that are able to be obtained.

For example:
Does the chat line staff member have visual access to all your account details, your website etc?
What are examples of questions members ask? (some FAQ's?) and replies to those questions?

I am particularly interested to know exactly what qualifications and experience specific chat line staff have, not some vague response that they can answer all your questions, or that they are all IT experts.

Further I would query how many chat line staff are employed and how many are online and available at any given time to respond to customers questions. Are they direct employees of Imergent or is this function outsourced? (the level of service and care can often drop when outsourced).

If Storesonline are unable or unwilling to respond directly to these types of questions I would suggest the sales staff do not know, do not particularly care, or are attempting to over-sell to potential new customers by giving impressive but inaccurate and vague answers.

The support and servicing is the key issue in deciding whether to risk entering a business arrangement with a company like SOL. SOL clearly have a very strong sales and marketing approach, and the risk lies in whether they will deliver what is promised.

Bad Debt Expense and handling of debtors
Bad debt expense for the three months ended March, 2005 is approximately 26%.

This figure is high and raises further questions.
Non-payment by customers is often an indication that customers are dissatisfied with products and services. Companies with good operational controls would investigate reasons for non-payment and if these were a result of customer dissatisfaction attempt to remedy the problems so they will not occur again.
The notes to the quarterly report on page 9 titled Trade receivables and Allowances states the following:
The company offers to its customers the option of finance, through Extended Payment Term Arrangements (EPTAs), purchases made at the internet training workshops. A portion of these EPTAs, are then sold, on a discounted basis, to third party financial institutions for cash.

In other words your debt is on-sold to third party F.I's. This is of great concern especially in Australia and New Zealand where there is specific Fair Trading legislation that may require provision of refunds in the event of the goods not being fit for purpose, or misrepresentation of services. How willing would an organisation like Imergent be in refunding your fee when they have on-sold your obligation to a third party?

As a customer I would be alarmed at comments in relation to debt collection on page 12 of the Quarterly report, particularly paragraphs 3 and 5. Paragraph 3 states that Imergent makes every effort to collect EPTAs including engaging professional collection services. What happens in the case of non-delivery or dissatisfied customers? Imergent are silent on this and make no comments in relation to Dispute Resolution Procedures.

Despite use of debt recovery professionals a staggering 47% of EPTAs not sold to third parties become uncollectible during the life of the contract. Reviewing the number and variety of complaints publicly available it is perhaps not a surprising figure.

Imergent also detail that they have a history of collecting under original terms of the agreements without making concession. Lack of flexibility is not favourable to a customer.
Aggressive debt recovery can often be a precursor to litigation. Dissatisfied customers often respond to debt recovery proceedings by issuing counter suits. Imergent appear to adopt this practice.

Research and Development
It is interesting to note the level of research and development comprises $230,471 of the total operating expenses of $19,415,120 for the three months ended March 31, 2005.
The note on page 19 of the annual report state the figure consists of a number of components some of which relates to the actual Storesonline product, but also includes a number of other expenses not related to the actual product. The Research and development is small when compared to the selling and marketing expense of $8,052,263 for the three month period, it is clear that Storesonline at this point in time are primary a marketing organisation with little ongoing investment in their software product.

During the quarter, the company hosted 184 workshops, 32 of which were outside the U.S., compared to the third quarter of 2004 when the company conducted 146 workshops, 8 of which were international.

While the marketing focus in itself is not a bad thing, it is interesting to note that the company is a marketing company outsourcing many of its customers information technology requirements (including original software development as advised in the Introduction and Workshop).

Customers outside the US
Note Imergent, Inc is a US based company and they do not have overseas offices. If you wish to contact them by telephone you will pay international rates and you will only be able to speak to a person during Mountain Time.

You will not be able to speak to any local SOL employees or sales or marketing staff travelling through your country (they do not deal with technical issues) and you will note you are not able to attend any future Introduction and Workshop events (as you will be required to sign a contract stipulating this before attending the Introduction and Workshop). Communications in setting up your website will therefore primarily be email and the chat line.

If you pursue legal action against SOL (or its parent) in your home country it is unlikely the judgement will be able to be enforced as SOL is based in the US and they do not have assets outside the US. Dealing with an overseas company such as SOL represents an increased risk in this regard as the company will be aware that it is expensive for an overseas customer to pursue them in SOL's home jurisdictional. In the case of SOL, legal fees to pursue legal action in the US will quickly exceed the amount you are attempting to recover for the basic six web site package.

I would also question what effective enforcement powers regulators outside the US have other than injunctive remedies to prevent a company such as SOL from operating or carrying out certain activities in the local (Non-US) jurisdiction.

Dispute Resolution Procedures
It is apparent that Storesonline do not have an effective Dispute Resolution Procedure in place. There is an overwhelming number of dissatisfied customers apparent from a wide variety of sources including media, government regulators, internet forums, and from the company's own reports.

An effective dispute resolution procedure will enable the customer to escalate an unresolved issue higher in the organisation to an employee who has the experience and authority to resolve the issue. It appears that Storesonline ignore many of their customer's complaints and as a result some of these customers seek to air their grievances publicly and in doing so attempt to warn other potential future customers.
An effective dispute resolution procedure will also offer the opportunity for mediation, avoiding the necessity for legal action.

It is apparent that there has been and continues to be a significant level of legal action bought against Imergent, Inc including several class actions.
A review of page 15 of the quarterly report titled (8) Contingencies provides damning evidence of this in Imergent's own words.

Complaints:
I have reviewed a number of sources of complaints made against Storesonline, including www.ripoffreport.com , various online forums able to be located through the major search engines, and comments of various international regulatory authorities.
Complaints against Imergent, Inc, and its subsidiaries can be divided into the following categories:

1. Unreasonable sales pressure, high pressure sales tactics.
2. Not being given full information as to on-going fees and cost.
3. Administrative errors

Service and support

4. No response
5. Slow response
6. Unhelpful, bad advice, and errors in advice

Failure to deliver
7. Problems in functionality, including merchant services, obtaining a working website as specified
8.Difficulty in obtaining drop-shipping customers when promised that there were many to choose from.
9. Problems with Link4Trade (getting numbers of links promised)
10. Other

Requests for refunds/termination
11. Request for termination of contract (both within the 3 day termination period and outside this period) due to non-delivery/misrepresentation.
12. Request for money back as a result of non-delivery/misrepresentation and resulting problems with adverse credit ratings.

Both the number of complaints and the wide variety of complaints is disturbing.

ACCC investigation in Australia
I draw attention to the Australian Competition and Consumer Commission (ACCC) comments below which are current and raise further serious questions.
http://www.accc.gov.au/content/index.phtml/itemId/609146/fromItemId/142

The ACCC obtained the following orders on 1 June 2005 on an ex-parte basis:
an injunction preventing StoresOnline and Mr Perkins from transferring funds outside the jurisdiction of Australian courts, pending further hearings on the case
an order that, prior to the commencement of all remaining seminars or workshops to be conducted by StoresOnline in Australia, StoresOnline inform participants that the ACCC has commenced proceedings in the Federal Court of Australia seeking orders restraining StoresOnline from making misleading or deceptive representations.

It was interesting and comforting to note that two staff members from the ACCC were present at the Introduction and Workshop run by Storesonline on 3rd June 2005 at the Park Hyatt in Melbourne. An obviously disgruntled presenter quickly read through the required script not responding to directly to any of the allegations advising that these would be addressed throughout the day. He did however advise they had a chat line in response to the ACCC's assertion that SOL's 24/7 support was a misrepresentation. The other points were not responded to directly at any point in the day's workshop.

The allegations are specifically:

The ACCC alleges that StoresOnline has engaged in conduct in breach of sections 52, 53, 55A and 59 of the Trade Practices Act 1974 as a result of making misleading or deceptive representations to participants of its seminars or workshops in Australia.

The ACCC also alleges that Galaxy Mall was knowingly concerned in the alleged breaches by StoresOnline of the Act.

The orders the ACCC is seeking are intended to restrain StoresOnline from making a number of alleged misleading and deceptive representations to participants at seminars or workshops conducted in Australia, including that:

the software and tutorial package provided by StoresOnline for the purposes of setting up websites was easy to use
no previous computer knowledge or experience with the Internet was necessary to set up websites using a StoresOnline package

StoresOnline would provide support 24 hours a day, 7 days a week

specific services associated with setting up and maintaining websites were included in the StoresOnline package and purchasers would not be required to pay an additional amount

a testimonial of a person who purchased a StoresOnline package was unscripted and spontaneous, and

a person giving a testimonial about a StoresOnline package was not affiliated with StoresOnline, or a company associated with it.

The matter has been listed for hearing before the Federal Court, Sydney on 3rd June 2005 for further consideration of the injunctive relief sought by the ACCC.

Name changes:
It should be noted that Imergent, Inc has been undergone a name change from Netgateway, Inc, is should also be noted that some of the reported names the company uses or has used in various jurisdictions are listed below:

Storesonline Inc
Storesonline.com Ltd
Storesonline International, Inc
Galaxy Mall, Inc
Galaxy Enterprises, Inc
Iregnow
netregnow
Inet
PMI
Community Architect
Dynamic Image Generator
50megs

The name changes and wide variations of apparently unrelated names Imergent have carried out business under raises questions as to why they have not attempted to build their brand by choosing one name.

The strategy of changing names and operating under a wide number of unrelated names is often used in attempt to mitigate the impact of bad press. Imergent may be deliberately choosing this strategy to avoid bad press affecting on-going sales. If this is the case management are clearly operating with some deliberate deception and their business ethics should be called into question.

David
Melbourne
Australia

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This report was posted on Ripoff Report on 06/05/2005 10:53 AM and is a permanent record located here: http://www.ripoffreport.com/r/Storesonline-Inc-Imergent-Inc-Galaxy-Mall-Inc/Orem-Utah-84097/Storesonline-Imergent-Galaxy-Mall-RIPOFF-Warn-Australians-under-investigation-fail-145118. The posting time indicated is Arizona local time. Arizona does not observe daylight savings so the post time may be Mountain or Pacific depending on the time of year.

Ripoff Report has an exclusive license to this report. It may not be copied without the written permission of Ripoff Report.

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