Daily deals have more fine print
Daily deals via sites like Groupon and LivingSocial now come with more caveats and restrictions. But that may not be all bad for consumers.
This post comes from Kelli B. Grant at partner site SmartMoney.
Daily deal sites in the vein of Groupon or LivingSocial offer vouchers, typically at half-price, for purchases as diverse as skydiving sessions, burritos and luxe spa treatments. Each deal is up for grabs for a matter of hours or until it sells out, whichever happens first.
But in addition to the vast array of offers, consumers are also increasingly likely to find restrictions that they haven't previously encountered -- say, limits on what they can order at a restaurant or even blackout dates.
The reason, experts say, is that with some experience with daily deals under their belts, spas, restaurants, fitness centers, retailers and other businesses have figured out how to better craft offers to their advantage. A Rice University study released last month tracked businesses that have been offering daily deals since last year. It found that 61.5% of businesses running daily deal promotions this spring made a profit from doing so, versus 55.5% the previous year.
Researcher Utpal Dholakia, a professor of management at Rice, says the uptick suggests that the terms of the newer offers made them more profitable. And a February study from Cornell University's Center for Hospitality Research noted that hotels that described themselves as "very satisfied" with their deals had carefully managed details of their offers.
"These businesses are getting smarter about how they approach daily deals," says Dholakia.
And the deal sites, eager to keep their merchants in the fold, are making it easier to customize their rules. "Groupon has always approached the deal creation process on a case-by-case basis," says spokeswoman Julie Ann Mossler, who adds that the company continues to become more flexible about its terms. LivingSocial spokesman Brendan Lewis says the company talks extensively with merchants about what they hope to get out of the deals.
The extra fine print may not be all bad for consumers. In fact, a little additional verbiage may save a shopper from an expensive misstep. For example, most deals now note two expiration dates -- one for the value the consumer paid and another for the discount promotion, says Dan Hess, the chief executive of DealRadar.com, which tracks daily deal offers.
So, on an offer for a $65 massage for $35, shoppers might lose the $30 difference if they don't book in time. But the $35 they paid will be valid for at least five years, per federal regulations -- and some sites say it will never expire. That detail wasn't always clear, which led to consumers losing money, says Hess. (Post continues below video.)
Still, shoppers might lose out anyway if they buy a deal with too many strings attached. Consumers surfing for daily deals should look out for these four restrictions experts say are becoming more common -- and one that's fading away:
Fewer redeem-for-anything deals
When the daily deal craze started, it was common to see offers such as a $25 restaurant certificate for $12.50. Now, those deals are rarer. Consumers are more likely to see deals that cover a specific purchase with a stated value -- say, two burgers and two drinks valued at $25 for $12.50, says Jack Vonder Heide, the chief executive of Technology Briefing Centers, a research firm.
That level of specificity lets merchants steer consumers to items and services that have a bigger profit margin or aren't selling well. But those stated values may not be an accurate reflection of the regular purchase price. In many cases, says Vonder Heide, retailers and restaurants may already be offering specials or other deals on those items.
More blackout dates
Want to redeem your voucher on a Saturday night? Good luck. Businesses are becoming more likely to limit redemptions to off-peak times, usually weeknights. Some will OK redemption during busier times but charge a small fee for doing so. Why the new stinginess? Businesses want to avoid alienating customers who pay full price at times when services are most in demand, Hess says.
Reduced voucher values
Typical discounts are still hovering at the 50% mark, but in some lower profit margin categories -- notably spas, restaurants and fitness -- the dollar values have gotten smaller. "Last year it might have been $30 worth of pizza for $15, and now it's more $15 for $8," says Dholakia.
The idea: Lured in the door by the lower-value discount, shoppers will add more tacos or tanning spray at full price. (Groupon's Mossler says that the ideal offer "promotes overspend" while still offering value to the consumer.)
But this shift isn't universal. Deal-watchers are seeing higher-value offers in categories like medical procedures. The profit margins on Lasik eye surgery or invisible braces are relatively high, and there's no worry about repeat business, so merchants have a greater incentive to be competitive, Dholakia says.
The addition of smartphone-accessible "instant deals" over the past year has enabled merchants to sell offers redeemable on that day only. But it's getting more common to see even regular daily deal offers that must be used within days or weeks, rather than months.
Some merchants turn to daily deal offers as a last-ditch effort to grab customers to avoid going out of business, so it's often smart to use deals quickly anyway, Dholakia says.
More 'all-customers' offers
"New customers only" has been a frequent fine-print provision on daily deal vouchers, but it's becoming less common as businesses test multiple deals on different sites to draw in various groups. "Merchants are generally finding that it takes a long time to get a repeat customer," says Vonder Heide. For many coupon holders, he adds, "If there's only an offer for new customers, that's the end of the relationship."
Groupon recently introduced a rewards program for repeat customers, while LivingSocial has added a Chase-branded credit card that awards shoppers for site purchases. Other sites are likely to follow suit with similar incentives, Hess says.
More from SmartMoney and MSN Money:
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- What's wrong with daily deal sites
- Groupon hits an all-time low
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