A Deal is Not Always Such a Great Deal

Apparently that goes for Groupon and LivingSocial Deals too

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A Deal is Not Always Such a Great Deal
[ Business]

Thumbtack.com put out some research last week suggesting that many daily deals in the local services industry are priced equal to or higher than the average local price of the service. In other words, the deal isn’t always much of a deal.

Since that study, the site has done some more digging, placing phone calls to various businesses that have run deals with Groupon and LivingSocial, and has found that the deals appear to have been inflated in various cases.

“In 8 of the 10 deals we reviewed, the ‘regular’ prices quoted by Groupon and Livingsocial were higher than the prices quoted by the same merchants when we called them,” says Thumbtack.

“Of five Groupon merchants that we called, all quoted prices lower than the merchant’s regular price advertised by Groupon,” says Thumbtack. “Of five LivingSocial merchants that we called, three quoted prices lower than the merchant’s regular price advertised by LivingSocial.”

Groupon deals inflated?

LivingSocial deals inflated?  
It’s not as if inflating prices for sales is a new concept. I’d say the practice has been around for decades, but in the midst of the daily deals craze, it’s got to be worth noting that some businesses may be doing this. Perhaps before you buy a “deal,” it would be wise to price the service to begin with, before determining just how great a deal you’re actually getting.

A Deal is Not Always Such a Great Deal
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  • http://www.resortchiangmai.net/ Boonchai Boontam

    Best Great Deal , Thanks you very much.

  • http://www.PlacesToEatOkay.com Steven

    I figured somebody would catch a few of these businesses doing something like that. I mean first they are expected to discount the item or service for at least 50% off, and then have to pay the service that promoted the offer a percentage of the gross revenue. I can see that happening for a very high profit margin item or service, but not for as many deals I’ve seen on the daily deal type sites. All these deals just looked too good to be true. I would also watch out for stores that simply raise their prices and then all of a sudden the whole store is on sale, like furniture stores do. What’s to stop me from raising my price and then giving a deep discount on a place like Groupon? People really need to still shop around before being drawn into the deal, and places like Groupon need to research what their advertisers are selling to make sure it’s a real deal. I mean I would hate to think that Groupon and living social wants to be known as the places that might have a deal, instead of for sure having a deal.

  • http://www.DaltonPhoto.com rick

    Local photographers are offering photo classes that they don’t normally offer. Of course the fee is hugely inflated, (made up) to sound like a great deal. Since there is only instruction, and no product, it may work for them. For those selling a product, or who have employees, it could be a bad deal.

    If they offer a $100 product at 1/2 price via Groupon, Living Social, and then (after the groupon take) the company gets 1/2 of that.. That company is making $25. Or is it?

    A business owner has to come up with a pretty creative offer if they are going to take a 90% pay cut. You thought it was a 75% cut, but all their expenses remain the same, employees are paid the same, office rent is same, COGS (cost of goods sold) insurance, taxes, etc, etc. A portion of all those expenses (overhead) has to be taken out of the perceived profit as well. All the loss is from the owners personal profit.

    Due to this, Group-on type advertising may be a short-lived phenomenon, and could actually expedite the demise of some businesses. Especially those that operate on a thin profit margin.

  • http://www.seonorthamerica.com Tom Aikins

    The daily deals craze started out with a bang and it’s going to crash just as loudly. Groupon has never even made any money. What idiots not to sellout to Google for $6 BILLION when they had the chance last year.

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