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Concerns Regarding Possible Groupon Insolvency Inspires Tips for Buying Daily Deals

By (view all posts by pmiller)
at 6:58AM Thursday July 28, 2011
under Newsworthy

Photo courtesy of Groupon, via Flickr

Last month the popular daily deal site Groupon submitted its paperwork to the SEC so it could become a publicly traded company. Since then the controversy hasn't let up for a second.
This week has been especially contentious. First, Groupon surprised the financial world by dropping over ten million dollars on Zappedy, a "mystery company." Then it was revealed that the SEC would investigate Groupon over some bizarre accounting practices.

Some are saying that Groupon is destined to become a financial powerhouse, while others believe Groupon will collapse at any moment. It remains to be seen whether the ascent of Groupon will benefit investors or even the businesses that accept the coupons. Even some of Groupon's customers are dissatisfied with the service.

All of this uncertainty shouldn't keep you from taking advantage of a Groupon or another daily deal, however. Just make sure you exercise some caution. To that end, here are some tips to keep in mind before--and after--you buy.

Do Your Homework

According to one study, 80% of daily deals buyers wouldn't have spend that money otherwise. One way to read this is that a huge sum of Groupon's sales come from impulse buys. To ensure your money isn't going to waste, make sure to read up on the company to see if you like their work.

A good way to do this is to consult user review sites. For a comprehensive list of user review sites like Yelp, Amazon.com and more, see Stella's post about rating the rating sites.

There are some specific things to look for. For one, it's no secret that some near bankrupt businesses employ Groupon as a "Hail Mary" pass.The reasoning behind this is simple: Groupon pays the company for their share of the coupon proceeds in advance. If a business is struggling, or about to close its doors anyway, there's no reason not to take the check even if it means potentially leaving a bunch of annoyed customers with unredeemable coupons. So make sure those reviews don't paint a picture of a business that is unpopular or crooked.

Also, make sure you get some idea of the company's pricing before you buy. There are stories of shady businesses that mark up their products before they issue a Groupon. When researching a daily deal, compare the discounted price with the price of similar products or services by that company's competitors.

Wait a Little

The benefits of not buying right away are pretty obvious. As Robin Shreeves points out, giving yourself a few hours before you buy should eliminate the chance that you're acting on impulse, and it'll also give you some time to read the fine print and call the business so they can answer any questions.

But it's a good idea to wait even after you get the deal. Laura Baginski makes the case that you should not redeem that Groupon in the first week. Businesses are typically swamped immediately after their Groupon goes live--and lots of these companies aren't used to getting that much business all at once. A one-week buffer should be enough time to get the early rush out of the way, while also allowing the business to find ways to cope.

Don't wait too long, however. There's another rush in the last week before a daily deal expires, so make sure you get in there before the stampede of procrastinators.

Deal with Buyer's Remorse

Let's say you waited, you did your research, you and bought the daily deal, and somehow you still regret the decision. This happens. Groupon, LivingSocial, and other daily deals sites will typically not issue a refund for an unused coupon unless the business refused to redeem it, so that option is out. The only thing left to do is handle buyer's remorse intelligently.

If you're not one to give the coupon as a somewhat-lazy gift to someone you don't care about that much about, you can always try to sell it. As Groupon and other daily deal sites grow, they've started a bustling marketplace for voucher re-sellers.

The sheer number of coupon re-sellers should be an indication of how big the daily deals market has become. Two of the oldest are Lifesta and DealsGoRound. Some newer sites on the scene are TakeMyCoupons and SellMyDeal. The top choice for learnvest.com is CoupRecoup. CoupRecoup is popular because they do not charge anything for re-selling the coupon, but some of the other sites offer buyer protections at the cost of a small fee. Be sure to look around to decide which site is right for you.

If you have your own tips and tricks for getting the most out of a daily deal, or even some horror stories of Groupons gone awry, please share in the comments.