Modelry - A Random Walk through Internet Real Estate: Watch Out for the Next Groupon or Living Social Deal = Price Increases

Watch Out for the Next Groupon or Living Social Deal = Price Increases

Groupon LogoLiving Social LogoWatch out for the next Groupon or Living Social Deal.  Merchants are raising their prices without you knowing it.

Don't get me wrong: I love Daily Deals from Groupon's and Living Social.  I would say we probably spend $100 a month on daily deals for various things that we never thought we needed.  

Groupon just went public.  There are a lot of people questioning whether Groupon's are good for merchants.  I question whether Groupons or Daily Deals are good for consumers.  One of the consistent problems with Daily Deals from Groupon, Living Social, Amazon Deals, Google and FaceBook is that the merchant raises its prices first and then offers you a ridiculous discount via Groupon, so in the end, you as the consumer don't save much money at all.    There have been some high profile SNAFU's regarding these pricing strategies where businesses have increased prices for Groupon customers.  The most visibile was the FTD Groupon ahead of Valentine's day 2011.  Harvard Business School published a study on this phenomenon recently.  

My wife and I suffered from the Groupon price increasing phenomenon with a Living Social for Seattle Limo Taxi today. Living Social advertised $25 for $50 for a car service.  Crazy good deal.  We bought three since we travel a lot.   On their web site, they advertise the lowest rates in Seattle and that a car from Bellevue to the airport is $39.50.  Car service from our house generally ranges from $50-60 to the airport.  See below picture.

Seattle Taxi Limo Pricing

So we get to the airport, take out the Living Social voucher which says multiple vouchers can be used for multiple trips.  We give the $50 voucher to the driver who then says there is no change.  Based on their web site and having called them prior to booking the Living Social Deal, it should have only been $40 and we should get $10 in change on the voucher for the return trip.  We discuss it for a couple of minutes.  We then call the Seattle Limo Taxi office.  I ask him how much it costs to go from Bellevue to the airport and he says $60What?  Now the price went up from $50 to $60 when we were using a Living Social voucher. 

OK, my wife is thoroughly annoyed at this point.  We hand over the $50 voucher and give the driver a $5 tip.  My wife asks, "Should we call up Living Social to cancel the other two vouchers?"  I was in disbelief and said that there must have been some mix up. 

So we decided to call up Seattle Limo Taxi to book another car to see what the price should be:

Me: How much for a car from Bellevue to the airport?
Seattle Limo Taxi: How many people?
Me: 4 - 2 adults, 2 kids
Seattle Limo Taxi: $50
Me: Your web site says $40
Seattle Limo Taxi: That's for three people, you have four.  $10 extra for another person.  Do you want to book it?
Me: No, I am just calling around.
Seattle Taxi Limo: Ok, ok.  I can give it to you for $40 as long as you are NOT using a COUPON.

What???

So here's what I understand of their pricing:

  • $40 on their web site, but no one really pays $40
  • $50 if you call them
  • $60 if you use the Living Social Daily Deal

So should I be upset?  We did get a car ride which is normally $50-60 in price for $25.  Yes, that is a great price.

Regardless, we called Living Social to cancel the other vouchers.  You have 5 days from voucher purchase to cancel a deal and get your money back.  Living Social apologized for the bad experience and  refunded us out money.

But, now that we are Living Social and Seattle Limo Taxi-less, the real question is: can we get a ride from SeaTac airport to Bellevue?  Anyone?  Bueller?

Nikesh Parekh

Add Me on Google+, Follow Me on Twitter, Connect with Me on LinkedIn:

Google+ LinkedIn Button   Twitter Logo

Comment balloon 45 commentsNikesh Parekh • November 05 2011 10:30PM

Comments

Nikesh-I've heard similar complaints, one in particularly about services, where you book one and can't get in for months. Obviously there are some kinks to get out.

 

Best

Posted by Adrian Willanger, Profit from my two decades of experience (206 909-7536 AdrianWillanger-broker.com) over 6 years ago

Hi Niki,

the old saying "if it sounds too good to be true......" comes to mind, and it will not be long before there are so many of these discount brokers that we will have a multiple tier pricing system for many services and products....

Posted by Peter Pfann @ eXp Realty Pfanntastic Properties in Victoria, Since 1986., Talk To or Text Peter 250-213-9490 (eXp Realty, Victoria BC www.pfanntastic.com) over 6 years ago

I think these Groupon deals are like many things -- too good to be true. The merchant realizes they need to recoup $$$ somewhere and they do -- um, from YOU!

Posted by Erica Ramus, MRE, Schuylkill County PA Real Estate (Erica Ramus - Ramus Realty Group - Pottsville, PA ) over 6 years ago

Niki - Amazing isn't it.  We haven't used the coupons since there aren't any "deals" in our area.  But we've heard horror stories from friends!  Good luck and hopefully you'll make it home from the airport!!!

Posted by Bill & Cyndi Daves, TeamDAVES - Your REALTORS In the GA/NC Mountains! (Hiawassee, Young Harris, Blairsville, Hayesville, Murphy and Beyond!) over 6 years ago

My nephew was recently told by a Restaurant that they had reached the "Daily Limit" of coupon deals... AFTER he and his wife had finished the meal. 

"If it sounds too good to be true..."

 

Posted by Fred Griffin, Licensed Florida Real Estate Broker (Fred Griffin Real Estate) over 6 years ago

Hi Nikesh - A few months ago, I visited the Groupon website for the first and only time to see what they offered in the Toronto area.  The Greater Toronto Area has over 5 million people.  I think I might have found one or two advertisers from the area.  There were a small number of other advertisers advertising on the Toronto page but they were located in the USA or elsewhere.

Posted by FN LN over 6 years ago

We've gotten a couple of good deals from Groupon and our local Daily Deal and have seen no pricing snafus, but we haven't bought that much through them. As with all things, caveat emptor...

Posted by Pat & Wayne Harriman, Broker/Owners, Wallingford CT Real Estate (Harriman Real Estate, LLC (203) 672-4499) over 6 years ago

Dear Niki -
I guess that Robert Heinlein was right - TNSTAAFL.
Have a happy day -
Lynn

 

Posted by Lynn B. Friedman, Concierge Service for Our Atlanta Sellers & Buyers (Atlanta Homes ODAT Realty Call/Text 404-939-2727 Buckhead - Midtown - Westside -- and more ...) over 6 years ago

One thing I've found is that Groupon is VERY good about refunding your money, with no set expiration date for doing so (unlike Living Social's 5-day time limit as in your example).

I think with any of these "deals" you have to do your research and know ahead of time what you're buying and how much the savings actually is.  I've heard of some of the local merchants jacking up their prices for the Groupon/Living Social users too!  As a merchant, I would not offer this as part of a marketing campaign because you have to give too much revenue to Groupon.

Posted by Maureen Bray Portland OR Home Stager ~ Room Solutions Staging, "Staging that Sells Portland Homes" (Room Solutions Staging, Portland OR) over 6 years ago

HI Niki--your experience parallels any number of ones I've heard about from friends and family.  It amazes me that the merchants are smarter because that sort of information gets around to consumers quite quickly. 

Posted by Janet Jones, Home Staging, Interior Redesign Kihei, Maui, Hawaii (Just Your Style Interiors, LLC) over 6 years ago

That is an interesting story.  I have not used the coupons before.

Posted by Cheryl Ritchie, Southern Maryland 301-980-7566 (RE/MAX Leading Edge www.GoldenResults.com) over 6 years ago

Wwe've used Groupon for local restaurant deals in particular, with no problems. Since we eat at these places often, we know the menus well and would see if we were overcharged. So far, so good. But I am still leery of larger deals, higher costs, out-of-area merchants, etc. I would like it to be as good as it seems, and so far, it has been.

Posted by Sonsie Conroy, Energetic, Enthusiastic, Knowledgeable Realtor (I serve buyers and sellers everywhere in San Luis Obispo County) over 6 years ago

Oh sneaky sneaky! Around every corner someone is trying to swindle your money out of you! Thanks for the heads up on this because I never would have thought to check on this! Hope you are having a great weekend!

Posted by Rosalie Evans, The Evans Group, Sioux Falls, SD Homes For Sale (Meritus Group Real Estate) over 6 years ago

We do just local restaurants and have not seen price increases as yet. So far, noone has asked if we have a coupon prior to our ordering. This would be a "red flag" to me. While, in principle, the limo story is unfair, it still appears to be a discount.

Posted by Richard and Jean Murphy, (207) 712-4796 (Harborview Properties) over 6 years ago

Oh that is not good.  I sse the issue..the only one making money from these deals is Groupon/Living Social.  The merchant is paying an arm and a leg and the deals don't really pay out (not to mention that they've now sent the msg that their brand is worth less.

Posted by Debbie Gartner, The Flooring Girl & Blog Stylist -Dynamo Marketers (The Flooring Girl) over 6 years ago

Niki: If a merchant offers a $100 service - say a haircut or styling for $50, Groupon or Living Social only pays them $25 or less.  If the "special" is used as a loss leader and the business is able to "convert" those customers into "regulars" or at least repeats, the business will do okay. However, if the business allows the consumer to buy "multiples" I can certainly understand why a business would establish a coupon price. These daily deals are about building business for the long term. Sell one hundred  $100 haircuts for $25 without conversion and soon there will be no haircuts available.

Active Rain created a paying model so they could stay in business, grow and best serve their members (customers). Every employee likes/needs to be paid, and every business needs to be able to show a profit in order to survive.

Posted by Anne M. Costello (Weidel Realtors) over 6 years ago

Why do many so called "savings" apply ONLY if you declare the coupon or special offering BEFORE the price is quoted??  Because when the vendor knows you have a discount coming, the quoted price will be higher at the outset and then, when the "discount" is factored in, you reach a competitive retail price that gives the vendor their price and makes the consumer "feel good".

Am I jaded?  You bet!!!

I am amazed at the checkout stand when I see a shopper (usually a woman) going through a stack of coupons and the checker scanning the coupons for the discounts.  Sadly, the coupons are largely for junk and prepared packaged foods not fit for human consumption.

I'd love to see coupons for fresh fruits and vegetables.  HA!

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 6 years ago

I think the problem is with expectations. In the end Nikesh, it appears to me you saved money over booking or paying directly without the groupon. My understanding is you paid $25 for the groupon for something which actually would cost you $40 without the groupon. Now let's say they charge you the extra $10 since the voucher is only for $50. You pay $25 and $10 which is still a $5 savings. Or am I missing something? (It certainly would not be the first time) :) Have a great Sunday.

Cal

Posted by Cal Yoder, Homes For Sale in Lancaster PA - 717.413.0744 (Keller Williams Elite) over 6 years ago

Bueller??????

Posted by Dylan Taft, Ulster County Area Consultant (Dylan Taft Broker/Owner Taft Street Realty, Inc.) over 6 years ago

I'm definitely mentioning this one...

Posted by Loreena and Michael Yeo, Real Estate Agents (3:16 team REALTY ~ Locally-owned Frisco TX Real Estate Co.) over 6 years ago

When I was booking for a Cancun vacation. . Groupon came out with a deal. . .I decided not  to take it because of the uncertainty and now, I'm glad I did that.. .

Posted by Fernando Herboso - Broker for Maxus Realty Group, 301-246-0001 Serving Maryland, DC and Northern VA (Maxus Realty Group - Broker 301-246-0001) over 6 years ago

Wow Niki...i too am a Groupon buyer and have not had an issue yet but I am alerted..thanks so much!!

Posted by Ginny Gorman, Homes for Sale in North Kingstown RI and beyond (RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate) over 6 years ago

I have not bought anything on Groupon but I did bought a grocery store coupon for half price. Some things are too good to be real.

Posted by Mike Yeo (3:16 team REALTY) over 6 years ago

It's the same thing I wrote about this week. Little Caesars charging extra for switching the 1 topping on a pizza to something else, even though they've been doing it for years for the same price. I have one couple from Groupon for an awesome deal at a Mexican restaurant. I'm kinda scared to use it now.

Posted by Eric Michael, Metro Detroit Real Estate Professional 734.564.1519 (Remerica Integrity, Realtors®, Northville, MI) over 6 years ago

Ah, Nikesh, coupons and deals are deceivign :) A problem with groupons my friend has, is that the deals expire before he uses the coupon (you misplace it, and find only when the deal is over), or you go to places you otherwise would have never went (We went to the touted "butterfly place" in my area, and it was tiny and sad, and my youngest got scared of buterflies :) I was somewhat glad I used a groupon instead of full price, but it wasn't huge saving, if any actually). 

I got one groupon that I really put to a good use: something like $10 towards $20 ebay purchase. I'm an avid ebayer, I buy and sell for myself and for friends overseas, so that deal hit home with me right away! But it was only offered once, too bad!

When I first came to the US I was in awe with all the "deals", and "coupons", but I quickly learned that these are mostly tricks, and every other weekend there is a chance for a "blow out Fall / Labor day/memorial Day/ Veterans Day / End of season/ season starts early/etc etc" sale. My personal observation: sales never work for me. If I fall for "buy one get one free" for example, the first gadget stops working pretty soon, so I start using the second right away, or both are junk and I return them, or I mean to give one as present, but realize the person already has it etc... I have decided to disregard any deals and coupons and just buy what I need, regardless. Funny thing, it comes out cheaper that way. I still find deals here and there, but deal per se is not reason enough for me to buy  - not anymore!

Posted by Anna Tolstoy (Coldwell Banker Residential Brokerage) over 6 years ago

I've purchased a few Groupon deals but mostly they have been for buy one get one free or get $25 worth of X for $15.  You bring up a great point on checking against regular prices to see if it is really a deal.  I watched Borders raise the price of all of their books BEFORE they started their going out of business sale.  It's seems to be the way merchants say GOTCHA.

Posted by Cindy Jones, Pentagon, Fort Belvoir & Quantico Real Estate News (Integrity Real Estate Group) over 6 years ago

Niki, its human nature to jump at what we think is a good deal. It pay to investigate further before accepting one though. Good point and thanks for the heads up.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA over 6 years ago

I had a bad experience with an ethnic restaurant with a Groupon recently.  The waiter tried to explain an extra charge to us in broken English.  I read and reread the Groupon, what he said was NOT on the Groupon. I went to Groupons site while we were eating lunch. No mention of an extra charge EXCEPT Groupon's admonishment about local taxes.  When we went up to the cash register and the cashier tried to tell us it was an extra tax. His English was a lot better but he was not able to explain why they had a tax that other restaurants in the area do not charge.  Now I live in the area and eat out in the area often so I knew that was a bunch of BS, so I asked him for a printout of the cash register receipt.  He added the additional amount he was charging  as another food item NOT a tax. My dinner companion left the tip on the full price of the food from the menu (Groupon value + about $5)  and wanted to go retrieve the amount equal to the extra TAX from the tip and give it to me but that would stiff the staff.  

I had another bad experience with a Groupon, but again I think it had to do with a local merchant, (more the employees than the merchants)  being deceitful to increase their profit.

 

Posted by Maureen McCabe, Columbus Ohio Real Estate (HER Realtors) over 6 years ago

Nikesh...things are in a state of flux...change. Everything is trying to find their footing during these weak economic times. Your taxi example helped me to remember a recent cab ride my son took with friends. The cab driver never used his meter flag and then just arbitrarily came up with a high amount owed. Not triggering the flag when a passenger gets in is against some law. My son the attorney set the guy straight and his pricing too.W must stay alert during these times...

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) over 6 years ago

When it comes to food and such, you can keep track of the prices. For services like you had, they can raise it without your knowledge or letting you in on certain facts. That really stinks!

Posted by Jackie Connelly-Fornuff, "Moving at The Speed of YOU!" (Douglas Elliman Real Estate in Babylon NY) over 6 years ago

Niki- my husband's been watching Group On because they were going public.  No interest in buying though.  I've never used coupons unless it's for something I was going to buy anyway.  

Posted by Kathy Streib, Home Stager - Palm Beach County,FL -561-914-6224 (Room Service Home Staging) over 6 years ago

I was surprised to read about the amount the merchants have to pay Groupon.  The idea is to get you into the establishment, wow you with great service and get you back in the door without the coupons.  Basically, your first trip doesn't earn the mercant more than a couple of buck.  Oh well. 

Posted by Patricia Kennedy, Home in the Capital (RLAH Real Estate) over 6 years ago

Niki, if you use limo service, you had a choice to either save $15 with a coupon, or pay the regular discounted price and save nothing.  Although it's not exactly as you may have expected, it seems that the deal was good enough to keep.  It may be good enough to order again. The no-change policy is fairly normal for coupons.

Many service coupons have turned out to not be quite as good as they would seem.  Happenings books and their coupons often have surprises, as well as Val pak, etc. 

Posted by Mike Carlier, More opinions than you want to hear about. over 6 years ago

Niki, I haen't used Groupon, because I haven't seen enough coupons of interest to me. I heard their IPO brought in twice what Google offered to buy them and Groupon only sold 5% of their stock. 

Melville Capps

 

Posted by Melissa Ostrom & Melville Capps Newton MA - The Mel and Mel Team ((617) 388-3151 | Century 21 Commonwealth) over 6 years ago

Niki, Groupon seems to work very well here in the Coeur d'Alene / North Idaho area.  Great deals and happy merchants.  I have purchased approximately 25 so far.  Anything from services to restaurants to goods.  No problems so far.  I always tip 20+% on the FULL PRICE (not discounted). I guess my only complaint would be... watch the expiration date.  I didn't realize I had to use one of them within 90 days ... it expired.

Posted by Pam Jank, Your Coeur d'Alene & North Idaho Real Estate Pro (Coldwell Banker Schneidmiller Realty) over 6 years ago

We just recently purchased something from Groupon, redeem it and had a good experience. But I would also call GROUPON and address this with them so they know they are losing creditability if the vendors are scamming the system. The whole idea of Groupon, Living Social and similar services should be saving money and not be scammed.

Posted by Eileen Hsu, LICENSED REAL ESTATE SALESPERSON (Douglas Elliman Real Estate) over 6 years ago

Niki...

I guess the old adage about a deal too good to be true holds up! Sounds like there is a bit of deception going on here.

Posted by Richard Weisser, Richard Weisser Retired Real Estate Professional (Richard Weisser Realty) over 6 years ago

Nikesh - Thank you SO much for posting this! I am so sorry you got burned but this just highlights the typical games these companies have played forever! I just booked a hotel room online at $99/ night. Interestingly the AARP or AAA rate was $149 for the same room. I called and spoke to the manager and he said the best rate he could do is $129. He suggested I book the room online ASAP!
It is a sad situation. Thank you for highlighting it.
Bruce

 

Posted by Bruce Kunz, REALTOR®, Brick & Howell NJ Homes for Sale (C21 Solid Gold Realty, Brick, NJ, 732-920-2100) over 6 years ago

Nikesh, this sounds really, really fishy! No way...I'm sorry you and your wife had to go through this! Not a good recommendation here and I will remember this. EXTRA CHILD...$10.00??? Put him in an overnight carrier and sneak him right back out! They would never notice! LOL...for the ending here...I have no answers. I hope you worked it out. jeesh...what a mess! Unfortunately is sounds like yet another "upsize" scam. Good luck.

Posted by Deb Brooks (Brooks Prime Properties Wichita Falls Texas) over 6 years ago

The IPO was generally not locally subscribed. The local press has been largely critical....there is no product, no value added. 

I could go on for hours, but it's late. Maybe tomorrow.

 

Posted by Leslie Ebersole, I help brokers build businesses they love. (Swanepoel T3 Group) over 6 years ago

Niki, that is simply bad business. This type of shenanigans is going to hurt Groupon. Just bought $50 at a new restaurant for $25. Hmmmm, we'll see how that works out. Maybe different menus for those with coupons?

Sharon

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) over 6 years ago

Nikesh, I am not sure if all vendors have the same practice. Though I never bought anything from Groupon, I almost bought the $30 for $300 voucher from JetBlue on Google Offers. 900 vouchers were sold in no time - as I was considering it to be too good to be true - and it was! May be, way to go is to go Google?

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) over 6 years ago

It's not all that dissimilar to the listing prices of homes, especially for those buyers that want the 50% off listing price!

Posted by Gabe Sanders, Stuart Florida Real Estate (Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales) over 6 years ago

I am bit of a Groupon groupie.  My issue is that I buy them and then forget to use them.  That's not a very good deal for me.

Posted by Former Agent (None) over 6 years ago

I just came across this blog because I was looking at a NYC airport transfer from groupon.  The fine print is definitely a problem, it looks like a way better deal than it really is. 

Posted by Morgan Evans, LICENSED REAL ESTATE SALESPERSON (Douglas Elliman Real Estate) about 6 years ago

Participate