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Daily coupon site deals too good to be true?

May 9, 2011 12:00:00 AM PDT
Daily deal websites like Groupon and LivingSocial have exploded in popularity. While the sites can offer incredible bargains, sometimes the deals may not be as good as they might seem.

Bonnie Nakamoto knows her coupons. In fact, she never leaves home without them. Bonnie's car is stacked with a variety of coupons, so she's always ready to save on the go.

One reason Bonnie is such an avid shopper is that she has to budget for her family, which includes five kids. And her sister, Janene Zimmerman, has four of her own, so both women religiously check out daily deals from Groupon.com and other sites.

The two sisters recently celebrated their birthdays in high-flying style with a Groupon deal from iFLY Hollywood, a vertical wind tunnel at Universal CityWalk.

"It would have been $84 for two flights and a DVD. But it cost us $37," said Bonnie.

Like many of the daily deal sites, both Groupon and Living Social offer discounts of 50 percent or more on spas, restaurants and other businesses for a limited time if enough people sign up. But, you may not save as much as you'd expect.

A $40 Groupon from a Santa Monica restaurant costs $20, a 50-percent savings. But once you factor in taxes, tips and any part of the bill in excess of $40, your actual savings may be much less.

Among the drawbacks of the daily deals, if too many people purchase a spa or teeth-cleaning service for instance, redeeming the certificates isn't always easy, especially if the appointments are booked solid because too many were sold.

Some people purchase the group coupons on impulse because the deals are so tempting, but then never cash them in. Unlike pre-purchased gift cards, the deals have an expiration date.

That's led to class-action lawsuits against Groupon and LivingSocial, saying the sites sell certificates with short expiration terms knowing that many users will not redeem them on time.

The class-action suit against Groupon says the gift certificates "are sold and issued with expiration dates that are deceptive and illegal under federal and state laws."

Groupon told Eyewitness News if a coupon expires or if they have trouble redeeming it, the company will always refund their money back or apply what they've spent as credit toward a future Groupon.

Living Social says it offers refunds only within five days of a deal purchase.

A recent study by Rice University in Houston found that while sites like Groupon are popular with consumers, not all businesses are cashing in.

About a third of businesses surveyed say the social promotion coupons are unprofitable, partly because those businesses only keep a fraction of the money they normally would and many coupon shoppers are not repeat customers.

That's why the owner of Color Images, a printing business in Burbank, says he thinks the websites are not always beneficial to companies like his.

"It defeats the purpose of trying to have really good service and trying to make an impression for them to come back when you have a million customers that are trying to get a good deal and only use you once," said Jeff Whiteman, who owns Color Images.

As long as you don't over extend your budget or buy on impulse, the daily deals sites are a great way to save money. Just make sure you use the coupons before they expire.


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