by Leo Owen
The younger you are, the more likely you are to take advantage of the wonders of the web. Despite this general rule, it took me some time to trust on-line banking and truly embrace web shopping. I approached websites offering discount vouchers with initial trepidation but after a few successful well-researched purchases, I now have to reign myself in and be more selective.
Six months after first purchasing a restaurant voucher on Groupon for £22 of Greek food for a mere £8, I have used deal sites for buying discounted furniture, adventure activities, custom design photo albums, restaurant/hotel offers and beauty treatments. I really haven't looked back, attempting to promote the benefits of these sites to friends and family. My initially sceptical 64 year-old dad, has since been so taken with Groupon, he's booked a forthcoming family holiday to Sicily so all my persuasive techniques were well-worth the effort!
More recently, I experienced my first problem with an order and put Groupon's customer support service to the test. Having purchased ten hours of driving lessons and a practical test for £99 (with a normal value of £282), I soon discovered the driving school didn't seem to exist. With the voucher's use-by date looming, frantic daily phone calls were logged on an answer machine whose inbox was regularly full and a trip out to the company's address confirmed my suspicions. It was some weeks after firing out an e-mail and a month before the voucher's expiry date, that I finally received a response from Groupon. From this e-mail, within days the full amount was returned to me in Groupon credit - had I wanted to wait, I also had the option of a cash refund.
There are plenty of discount sites out there (Wowcher, Keynoir, Tickles, InTheCityILove, LetsBuyIt, Groupola, LivingSocial, KGBDeals...) but due to its phenomenally fast growth and recent negative media coverage, Groupon is perhaps the best known. Although the site is a fantastic source of unconventional gift ideas, cheap nights out and new local businesses, there has been criticism in the media about participating new companies taking massive hits, and in some cases almost being bankrupt by their involvement with Groupon.
Discount sites offer a vast array of deals from retailers that are sold via email and through the website directly to consumers in a "one day only" sale. In exchange, sites like Groupon provide a type of advertising for new or flagging businesses that instantly offer ready-made clientele who in an ideal world will become repeat and loyal customers.
The service works on the idea of bulk purchasing so can only be claimed if a certain amount of people buy it within the timeframe it's listed for. In theory this is a win-win situation with the customer getting a great deal through the power of team buying and the business getting enough customers to make it worth their while. As soon as enough people have purchased the deal, it’s activated and an e-mail voucher will be sent through. If not enough people buy the deal then it's cancelled but virtually all deals seem to go through due to large membership bases.
The way the voucher website model works, the retailer effectively discounts their product or service by about 75% so the customer gets 50% off and the promotional website take a 25% fee. For example, in the case of my failed driving lesson deal, I pay £99 directly to Groupon and in return get a voucher to redeem at the driving school that has an expiry date. Groupon keep 50% of the revenue (£49.50) and the rest would go to the driving school. Companies that have high fixed costs and low variable costs may be able to afford 75% discounts while others may find a deal is more popular than they ever-imagined and are soon over-run with low-profit business.