Published On: Tue, Dec 5th, 2017

Kickstarter parka woes shows downside of crowdfunding

Ordering from an online retailer can be tricky. Think about the downside before giving your credit card information.

What if the product is shipped and never arrives? Will the retailer track it down or leave you to deal with it on your own?

What if the product arrives and is unsatisfactory? Will you get your money back when you ask for a refund? Who pays the shipping costs to return it?

These questions are relevant in the case of North Aware Inc. This company makes the Smart Parka, which has built-in gloves and scarf, plus pockets designed for glasses, smartphone, earbuds and a tablet.

North Aware CEO Jamil Khan, 38, a software engineer, designed the parka as a lower-priced and more functional alternative to the Canada Goose jackets sold around the world.

Maggie Fung, for example, paid $ 600 as a Kickstarter backer. When her two coats didn’t arrive until December 2016, she returned them and asked for a refund.

“Despite North Aware’s promise that it would process a return within 48 hours, it’s been almost a year and we still haven’t received our refund,” she told me.

At first, the company said her return shipment hadn’t been processed because of the huge volume of Kickstarter orders. Its warehouse was closed for the season and she’d have to wait until October.

This fall, she was told that refunds to Kickstarter backers would be issued on a first come, first serve basis.

“We expect to process all remaining refund requests by the end of September 2018,” the company said.

You can find more than 7,000 comments from North Aware backers at its Kickstarter page. The company replies that it will try to track down missing coats through the shipping company and get to the bottom of the problem.

“If you have returned your products before the cutoff date, your refund will be processed. We are periodically processing refunds for approved refund requests and all refunds will be issued,” it says.

That sounded unfair to me. How could a company hold onto people’s money for one or two years after they had returned the product?

I sent an email to pr@northaware.com, saying I was a consumer advocate looking for information about complaints I’d received about delays in getting products, exchanges and refunds.

CEO Jamil Khan replied within an hour – and this was on a Sunday evening – inviting me to visit his office on Finch Ave. W., near Dufferin.

“It’s better that you see things in person and get our point of view to write a more balanced article,” he said, promising to answer all my questions.

Here’s a summary of what he told me at our meeting on Nov. 22.

  • Companies that use crowdfunding rarely offer refunds to backers if they can’t deliver on their promises. North Aware is an exception.
  • The $ 3.25 million raised on Kickstarter was used to market, produce and ship parkas to backers. Not much was left after conversion to U.S. dollars.
  • North Aware issued 469 refunds, worth $ 269,000, and planned to continue doing so over the next year.
  • More than 100 backers disputed the charge with their credit card issuers. As a result, North Aware couldn’t process a refund.
  • Some backers didn’t update their credit card information on Kickstarter. This meant they couldn’t get refunds.

He complained about Kickstarter backers forming groups to seek media coverage. A CBC story in October 2016, “Canadian parka company giving them the cold shoulder, customers say,” led to a sales drop that hurt its bottom line.

North Aware now sells the Smart Parka (slightly redesigned) for $ 349 to $ 450 at its website. Only at the checkout does it say that prices are in U.S. dollars.

It was hard not to feel sympathy for Khan and the problems he’d met as an inexperienced entrepreneur. But I felt worse for those who were out of pocket after returning products or never receiving a product at all.

Kickstarter doesn’t get involved in disputes and advises backers to post comments on the creator’s project page.

The Better Business Bureau also turns away complaints, saying they aren’t about a typical marketplace transaction.

“Crowdfunding is considered an investment in a concept or idea and is beyond the scope of the BBB. You may wish to contact Industry Canada or consult with legal counsel,” one backer was told.

Since our meeting, Khan and community manager Amanda Thorne have reached out to my readers and worked out most of the obstacles to offering refunds.

As with most things in life, the secret is timing.

Startup companies are sensitive to bad publicity, especially when they sell seasonal merchandise that has a best before date.

My advice: If you want excellent customer service, deal with an online retailer whose name you know and trust. Becoming a backer in a crowdfunding campaign leaves you with little recourse if the promises are not kept.

Ellen Roseman’s column runs in Smart Money. You can reach her at eroseman@thestar.ca

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Kickstarter parka woes shows downside of crowdfunding