A rise in the number> of group-buying sites offering daily deals is making it harder for bargain hunters to spot group sales that are worthwhile.
Group-buying sites offer limited-time purchase windows on discounted goods or services but follow through on the deal only if enough people sign up. Their ranks have multiplied over the last few months, as start-ups jostle for a piece of the profitable market. (Groupon.com, one of the earliest sites in the space, has said it expects to do more than $100 million in gross merchandise sales this year.)
Now, there are more than 500 group-buying sites worldwide, including local sites that cater only to a single city, says Jack Vonder Heide, the president of Technology Briefing Centers, a technology research firm based in Oak Brook, Ill.
The proliferation of these sites, which promise consumers savings, has actually come at a price: the time lost sifting through the growing pile of shady deals to find the ones worth supporting.
Make no mistake: Good deals still abound. On a given day, consumers perusing such sites can purchase a $25 dinner out for $12 at Groupon.com, a $30 cruise ticket for $10 at BuyWithMe.com, an $85 pack of Pilates classes for $50 at TheDealist.com and a $115 haircut for $55 at LivingSocial.com.
Yet many sites have attracted dubious sellers whose deals may not stack up.
Here are a few other ways the glut of sites and deals has impacted the group-buying space:
Good: Referral rewards
Group-buying sites want more market share, and they may offer site credits and free purchases if you bring a few more friends to the site and get them to buy a deal. Tippr.com vouchers grow more valuable as more people sign on.
Bad: Disreputable businesses
You certainly don t want to jump on a deal without doing some research, says Dan de Grandpre, the founder of sale site DealNews.com. Most of the time, you re signing up to buy from a restaurant, spa or other business that you haven t heard of. Don t count on the deal site to have done a thorough check. Read reviews on Yelp.com and complaints at the Better Business Bureau.
The group-buying site may not have a clean record either, say Allison Southwick, a spokeswoman for the Better Business Bureau. Check for complaints at BBB.org, although a new business is unlikely to have a record, she says. Follow up with a Google search for the site name and scam.
Good: Localized deals
Many of the larger sites now offer deals for specific neighborhoods or counties, as well as for a city at large. For example, SocialBuy.com s Los Angeles deals include sections for Orange County and South Bay-Long Beach. The expansion of the space means the sites can offer more deals simultaneously, businesses can target a manageable audience and consumers can more easily find deals that are convenient to where they live, Vonder Heide says.
Bad: Iffy deals
Sometimes, prices on a group-buying site can be matched or even beaten through other available coupons and offers, de Grandpre says. Some restaurants also offer gift certificates through Restaurant.com, which routinely sells a $50 voucher for $20 -- and can drop as low as $2 to $4 with the site s frequent 80% to 90% off coupon codes. That makes a $25 price tag on a group-buying site look expensive in comparison, he says. Check coupon sites and the business s own web site for promotions before buying.
Good: Retention lures
Businesses are finding that people who come in with vouchers aren t the type of people who are going to come back they re looking for the next discount, Vonder Heide says. The point of business participation in deal sites is to get repeat customers, so expect tactics such as email newsletters with exclusive discounts, and holdover balances in store credit.
Bad: Uncertain site futures
There are too many group-buying sites now for all of them to be successful. The market will shake out the players who can t survive long term, Vonder Heile says. When buying from a lesser-known site that doesn t have a proven track record, aim to use the voucher quickly to hedge against problems if the site goes under.
Good: More types of deals
More types of businesses are participating, offering vouchers on more common items or services, such as magazine subscriptions, dry cleaning and local grocery store cards. To avoid missing a deal or being inundated with daily emails from every site, sign up for aggregators like DealNews.com, Yipit.com, and 8Coupons.com. Each sends one daily email listing all of their local deals.
That can lead to more temptation, too, Southwick says. Before buying, ask yourself if you really need an item or service. Also check that the location and timeframe for the deal are convenient, she says. Will you really hit up a kickboxing class on the other side of a city, or have time for a kayaking tour in the next three months?
Bad: More fine print
As these promotions become more prevalent, expect more tricks, de Grandpre says. Already, there s fine print from the group-buying site limiting the number of items you can purchase for yourself and as gifts. The business can set restrictions as well. To boost profits, many restrict use to new customers or exclude certain items (such as alcohol in restaurants).
Good: A resale market
Missed out on a deal? Craigslist, as well as specialized sites including DealsGoRound.com, CoupRecoup.com and Lifesta.com, list secondhand vouchers. Buyers here should take even more care vetting the seller, Vonder Heile says. Only Lifesta.com offers a refund policy for buyers who discover their new voucher is a fake or already has been redeemed.