Over the past year, group buying sites such as Groupon, TeamBuy and WagJag have surged in popularity. Groupon, founded in November, 2008, and the originator of the model, now has 30 million subscribers globally. The competitors it spawned are also growing quickly. For store owners, the sites offer a way to attract many new clients at once. Through the site, merchants sell a coupon that can be redeemed for a product or service. The coupon only becomes active when a predetermined number of customers buy into the deal. Consumers get to enjoy steep discounts, as long as they remember to print out and use their coupon. Although both sides can and often do win, shoppers need to exercise caution to be sure that they are getting a good deal.
A review of the coupons recently on offer shows many of the group buys are geared toward personal care. You can have your fill of facials, manicures, waxes and teeth whitening. Restaurant meals are also a popular group buying item. I recently snagged several coupons to a local frozen yogourt store that my kids love and frequently beg to visit. The coupon cost $5 and can be redeemed for $10 of frozen yogourt. Reading the fine print on the vouchers sent to my inbox, I noticed the provision that there is no credit or cash back given. So when I go to use my coupon, I will need to spend as close to $10 as possible to get the full benefit. Since we pay for the frozen yogourt by weight, and not by cup size, hitting the target value may be a little tricky. As long as I spend more than $5, though, it's still an attractive deal and I'm pleased with the purchase.
Others have had less favourable experiences with group coupons. One reader recently wrote me about two disappointing restaurant coupons he bought through a Canadian group buying site that launched last year. The first coupon was for a popular sushi restaurant. It cost $33 and could be redeemed for $70.40. "When we arrived, we were told that the coupon was for a set menu – no substitutions or alterations," the reader complains. "I did the calculation based on the menu and the items didn't come close to $70 – it was maybe $50." His second coupon cost $10 for $20.75 worth of food from a Mexican restaurant. When he went to redeem the coupon, he was given two orders of burritos and chips. Looking at the menu, he discovered that the meal was only valued at $10.
Overall, this reader's experiences with group buying sites have been positive, but these two left him with a bad taste his mouth. "I want businesses to make a reasonable profit," he says, "but I get really frustrated when they misrepresent the deal."
Group buying sites typically guarantee to refund a coupon if one of the businesses they've featured goes under. However, their refund policy for a disappointing product or service is not as clear. According to WagJag's website, refunds are handled "on a case by case basis. Technically all sales are final but we will always see what we can do to make you happy." They note that the vouchers they distribute are "actually issued by the merchant, not us."
Out of all the group buying sites, Groupon appears to have the most conciliatory approach to customer satisfaction, based on their " Groupon Promise": "If Groupon ever lets you down, we'll return your purchase – simple as that. Why? Because when we do a bad job, we want it to be easy for you to punish us. We believe that when a customer has a bad experience, companies pay for it sooner or later – so we'd rather pay fast so we can make things right before it's too late." For legal purposes, Groupon includes the caveat that it is meant to be a city guide and a deal site, "not a site that alleviates your core human responsibilities."
To that I would add that you cannot abdicate your responsibility as a consumer when you join a group buy. As always, buyers need to beware and remember that if a deal looks too good to be true, it may be.