At a time when many Americans were feeling the financial pain of the Great Recession, Groupon promised deeply discounted limited-time offers on everything from fine dining to car detailing. Founded in 2008, the daily deals website had a legion of devoted followers.
Laura Jones of Lawrenceburg, Indiana, was one of those fans. The 43-year-old would regularly buy Groupon deals, but eventually got tired of the restrictions she encountered when redeeming them. The final straw was when she purchased a photo package for use while on vacation but found it nearly impossible to use. “They only had so many slots a day to use the coupon,” Jones explains.
However, in recent years, Groupon has worked to revamp its business model and lure back customers like Jones. Thanks to the changes, she is now a regular customer once again.
Whether you are a new or returning Groupon customer, here’s what you need to know about how the company does business today.
What Is Groupon?
Originally, Groupon offered a single deal per day. In order to activate the deal, a certain number of people would have to buy in. These daily deals were available for 24 hours, and early offers included two-for-one pizzas and 50% off at local retailers. Once a deal was activated, anyone who purchased it would receive a voucher that could be redeemed later.
Those group-activated deals are a thing of the past. Instead, Groupon offers vouchers for discounted goods and services that can be purchased at any time with no minimum number of buyers required.
How Does Groupon Work?
Before you start buying deals on Groupon, take a moment to understand the ins and outs of the site. Here’s what you need to know about Groupon:
- Both goods and services are sold on Groupon.
- Read reviews before buying.
- Understand the fine print.
- Not all deals are created equal.
- Promo codes and cash-back sites offer additional savings.
- Payment options can vary by deal.
- Groupon may not be ideal for all businesses.
Both Goods and Services Are Sold on Groupon
While you can still buy vouchers for discounted services or savings at local stores, Groupon now offers a wide selection of physical goods. You can find the following and more on the site:
- Hotels and travel.
- Home goods such as comforters and cookware.
- Jewelry and flowers.
- Sporting goods and fitness equipment.
- Entertainment tickets.
- Automotive services.
- Electronics including televisions and home security systems.
- Food and drink.
- Pet supplies.
Before purchasing goods from Groupon, make sure you understand what you’re getting. “Groupon does not acquire, own or stock this inventory,” says Derek Wall, founder and CEO of HUBX, a marketplace platform that connects sellers to B2B buyers. “They are merely a marketplace platform which sellers upload inventory and deals for Groupon’s customers to purchase.”
If you buy goods on Groupon, check the reviews to see whether other customers believe the item is represented accurately on the website. As for services, watch for red flags that could indicate a fraudulent deal. Be wary of buying a deal that has no reviews or very few purchases. Also check the company’s website and social media accounts to confirm it matches the details on Groupon, and if it seems too good to be true, contact the business directly to confirm they posted the offer. If you find yourself on the receiving end of counterfeit goods or a fake voucher, contact Groupon.
Understand the Fine Print
Don’t buy any deal vouchers until you’ve reviewed the redemption requirements. “Every deal has limitations in terms of when its promotional value expires and what the deal can and cannot be used toward,” says Kelly Goldsmith, associate professor of marketing at Vanderbilt University’s Owen Graduate School of Management. “It may be associated with a minimum spend at the vendor, and not all vendors within a chain may accept the Groupon.”
Other fine print details include additional fees and charges, restrictions for new customers only or access to a limited menu or selection of products when redeeming a Groupon voucher. Some Groupon deals may only be used on specific days. Be sure to check the refund and cancellation policy, too. If you are on vacation and purchase a Groupon for a weather-dependent activity, like whale watching, what happens if the company cancels? If you don’t live in the area, you may not be able to reschedule, so make sure you can get a full refund.
“Groupon allows their sellers to dictate fine print,” Wall says. That means there are no standard terms for deals sold on the site, so buyer beware.
Not All Deals Are Created Equal
At its start, it wasn’t unusual to see deals on Groupon for 70% off retail prices. Nowadays, you might find 35% off a haircut or 10% off a car wash.
Deeper discounts may be found on travel packages and physical goods. However, be aware of inflated retail prices. Just because something is listed on Groupon at a substantial discount doesn’t make it a good deal. Customers still need to do their research, compare prices and read reviews to ensure they are spending their money wisely.
Promo Codes and Cash-Back Sites Offer Additional Savings
Customers can save even more by using promo or coupon codes when ordering from Groupon. Though not always available, these codes can be found on free deal aggregators such as Slickdeals, DealCatcher or the browser extension Honey. A typical coupon may take 20% to 30% off the price of select Groupon purchases.
“One of the things I like about Groupon is that it participates with (cash-back and rewards companies),” Jones says. Rakuten offers up to 6% cash back for purchases its members make on Groupon. The free site also offers its own coupons for additional savings.
Payment Options Can Vary by Deal
While Groupon accepts all major credit cards and PayPal for purchases on its site, vendors may have different payment requirements when it comes time to redeem a voucher. For instance, not all merchants accept American Express cards. However, this information should be included on the deal page and is one more reason to read the fine print.
If you buy a deal redeemable at the warehouse club Costco, be aware that they only accept Visa credit cards. Some restaurants offering deals through the Groupon+ program may have other limitations such as restricting the use of non-reloadable prepaid cards.
Groupon May Not Be Ideal for All Businesses
While Groupon has made changes to improve the experience for merchants, such as staggering expiration dates to avoid a rush of customers, the site might not make sense for all businesses.
“When a vendor runs a Groupon (discount) that has small to zero margins, the vendor is taking on a lot of risk,” Goldsmith says. “He tells himself, all of the sacrifice will be worth it because surely they will reap the downstream rewards of these customers … coming back and paying full price later.” However, the reality is that Groupon users may not turn into repeat customers but will rather move on to the next company offering a good deal.
For that reason, Wall says Groupon isn’t a good option for small mom-and-pop businesses. Still, larger companies with bigger budgets may find Groupon a useful venue to drive sales. Savvy consumers who read reviews and watch for the deals they offer will undoubtedly benefit, too.