If you're looking for Christmas deals, read the small print
Websites offering cheap group buying, cashback and other offers should not be taken at face value
Sunday 21 October 2012
Alarmingly, the Christmas countdown is now on, but this year shoppers and revellers are thinking increasingly strategically, taking advantage of the full range of group-buying, cashback and voucher code sites to ensure a savvy spend on everything from gifts to a night out in the West End or even a timely escape from it all.
In reality, though, restrictions and hidden extras on these offers are leaving many consumers out of pocket in the most expensive month of the year.
There's no doubting the success of daily deals sites which base their model on collective buying power, securing special offers and discounts for goods and services on the proviso that a minimum number of sales – known as the tipping point – is met. Typically consumers have anything from a few hours to a few days to grab the deal and if the tipping point isn't met, the offer is withdrawn and there is no financial obligation to go through with the purchase.
It has been full steam ahead for group-buying websites such as Groupon, the fastest growing company ever, according to Forbes, in recent years. The model is such a success that copy-cat sites from the likes of Time Out, eBay and even Google have sprung up.
In theory, everybody wins; the retailers are guaranteed a particular level of custom and consumers are rewarded with a cheaper deal.
The reality, however, can be quite different. Despite impressive savings of up to 95 per cent being touted, these sites have come under heavy criticism for misleading customers and after going public last year, Groupon's stock has plummeted back to earth.
We all love a bargain, but complaints about the four major group discount sites, Groupon, LivingSocial, kgbdeals and Wowcher, have soared from 241 in the nine months to the end of September to 391 over the same period this year, with the Advertising Standards Authority (ASA) warning of fines if things don't improve.
Indeed, Groupon's trading practices have gained the unwanted attention of the regulator, leading to an investigation by the Office of Fair Trading last year, which found the company to be in breach of various consumer protection regulations. The OFT had particular concerns over reference pricing (inaccurately comparing original prices against sale prices), advertising, refunds and unfair terms.
But Roy Blanga, the company's UK managing director, says: "As a young and innovative business, Groupon acknowledges that our processes and procedures have not always kept pace with our rapid growth. We have worked transparently and constructively with the OFT to identify areas that require further changes. The OFT is pleased with the steps we have taken and the progress that has been made. We are willingly implementing these changes".
The consumer group Which? recently found after monitoring 165 deals from six of the most popular group-buying sites, four out of five West End theatre ticket offers could be found cheaper elsewhere. Sites were also advertising discounts based on the absolute maximum payable (particularly for meals and beauty treatments) and other deals advertised did not include various extras. One deal, offering a week for two in a four-star resort in Sardinia at £529 per person (including Ryanair flights from Stansted) via Groupon, didn't include hold luggage (potentially adding an extra £140 for a couple) or the transfer costs to the resort in Olbia (Which? were quoted £375 by a private-hire firm for both journeys).
"Group-buying sites can offer genuine savings, but they should be used with caution. We want these sites to be much more transparent about how they calculate their discounts and clearly state any additional fees that might be included," says James Daley, of Which?.
Restrictions can also be tricky, for example, meal deals are often limited to particular courses and you may only be able to dine on certain days and times. Again, extras for sides and drinks are common, all of which combine to make it a concerted effort to calculate whether any given deal is really as good as it seems.
You can always ask the websites themselves for more detailed information but even here you can come unstuck – Which? found that getting a speedy response about a 24-hour deal was a tall order with only Groupon and Happli answering within two hours. KGBdeals, Wahanda and Living Social waited to respond until the deal had expired, and Wowcher failed to respond for over a week.
Group-buying sites aren't the only tools for online shoppers; price comparison sites, voucher codes, members-only discounts and cashback sites are also immensely popular but again, it can be difficult to work out whether you really are getting the best price.
Although some can save you money, the ASA has been forced to ban numerous promotions that either simply don't exist or have been grossly exaggerated. Others offer the same deals you would get by going directly to the retailer, or vague details and awkward restrictions, and some will tie you in to a cheap deal and then force you to sign up to buy further items.
It's also worth remembering that sites such as Groupon generate profits by keeping a chunk of the money that the customer pays for any goods and services. That could mean you'll do better by cutting out the middle man – economy of scale or not.
Meanwhile, alongside affiliate marketing and lead generation, voucher code websites often generate revenue by selling data about the trends and shoppers they collect when you log on and click through, which could include your personal details if you're not exceptionally careful about unclicking those tiny boxes hidden at the bottom of the online form.
Plus, of course, there's the age old problem of spending money you hadn't planned just to secure a "cost-saving" deal.
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