At the risk of being slightly off-topic, I had a recent personal experience with a groupon clone (lets call it deals dot com dot au, or "the site" for the sake of this story) which might be of interest.
I purchased four service-based "deals" through deals the site. It eventuated that the business advertising the deals did not exist, had never existed, and was consequently unable to provide the services offered.
I was disappointed and contacted the site asking for a refund. They brusquely rebuffed my request for a refund and instead offered a "site credit" for future deals. I politely indicated that I didn't want a site credit and would prefer my money back. They insisted that their policy was to give only credits.
Fortunately I work in commercial law and could direct them to the relevant provisions of Australian consumer protection law which they were breaching. They quickly refunded my money.
Lessons:
1. These deals businesses are very reliant on doing extensive due diligence on their clients, and can easily be ripped off by an unscrupulous merchant. In my case they ate a loss of 150% on the value of deals purchased (full refund to me, 50% share to the merchant).
2. In order to minimise their losses this site was willing to break the law and outright deceive its customers about their rights. If I were more pugnacious I could have caused them some trouble. Unfortunately most of the customers they try to rip off probably aren't commercial lawyers and they get away with it.
My lasting impression: very difficult industry to turn a profit in, strong incentive to scummy business practices and the attendant legal risk those practices bring. I wouldn't invest.
1. The coupons usually can be redeemed for up to 6 months in these sites and the money is paid to the company only when the coupon is redeemed, so let's assume a 3 month average float time. With clever investing you could do much in 3 months.
2. As with gift cards, I assume, quite a significant percentage of those coupons are never actually redeemed.
I purchased four service-based "deals" through deals the site. It eventuated that the business advertising the deals did not exist, had never existed, and was consequently unable to provide the services offered.
I was disappointed and contacted the site asking for a refund. They brusquely rebuffed my request for a refund and instead offered a "site credit" for future deals. I politely indicated that I didn't want a site credit and would prefer my money back. They insisted that their policy was to give only credits.
Fortunately I work in commercial law and could direct them to the relevant provisions of Australian consumer protection law which they were breaching. They quickly refunded my money.
Lessons:
1. These deals businesses are very reliant on doing extensive due diligence on their clients, and can easily be ripped off by an unscrupulous merchant. In my case they ate a loss of 150% on the value of deals purchased (full refund to me, 50% share to the merchant).
2. In order to minimise their losses this site was willing to break the law and outright deceive its customers about their rights. If I were more pugnacious I could have caused them some trouble. Unfortunately most of the customers they try to rip off probably aren't commercial lawyers and they get away with it.
My lasting impression: very difficult industry to turn a profit in, strong incentive to scummy business practices and the attendant legal risk those practices bring. I wouldn't invest.