Group-Buying Deals: When to Sign Up and When to Say No

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There’s a big USA Today story that covers the online group-buying trend, which is undoubtedly a trend and not just something we journalists are pumping up in “next great” whatever fashion.

The story cities some impressive stats: Groupon, which is known for great deals as well as crazy promotions (one man is trying to win $100K by living on Groupon-discounted merchandise for a year), had 400 subscribers in November 2008, and a recent tally shows more than 4 million subscribers today. The operation began in one city (Chicago), and, by year’s end, is expected to offer daily deals in more than 100 cities in the U.S., Canada, and Europe.

For the uninitiated, group-buying sites—Groupon and LivingSocial are the biggies, but there are lots of smaller ones—offer daily deals in specific cities. The deal might be a percentage off the bill at a restaurant, or $25 off a purchase of $75 at a flower shop, or a half-price spa treatment, or a discounted bike tour, or—you get the idea. Some maximums and minimums are often part of the deal. Meaning: There may be a limit on how many coupons (or “groupons” at Groupon) can be purchased (so act quickly if it’s something you like before it’s sold out), and often, deals are only valid if a minimum number of people sign up, with the idea that you’ll encourage your friends to do so if it’s something you want. If the minimum isn’t reached, the deal is off, and no one’s credit card is charged.

As the number of group deals and dealers grows, figuring out the worthiness of each individual offer gets increasingly complicated. The most useful part of the USA Today piece is a round-up of tips of “What to Watch Out For” when considering signing up for a deal. Such as:

Make sure you can afford it. Matthew Moskowitz of notes that a deal where you buy $50 worth of food and drink for only $25 at a popular restaurant may seem like a great deal, but “after a few glasses of wine, an appetizer and a dessert, your bill is now $100 and you end up spending a total of $75.” That brings the savings down from 50% to 25%. “Perhaps if there was also a 30%-off coupon available to choose from, you could have scored a better deal,” he says…

Find reviews and recommendations. A great deal is only as good as the product or service it’s offered for. Go to websites including ConsumerSearch, Yelp, Bestcovery and TripAdvisor.

Read the fine print. Most deals have restrictions. Restaurant coupons won’t include tax or tip (and, as Frietchen notes, always tip on full value). Some are only valid certain days.

Read more:
Q&A with Groupon Founder Andrew Mason