Since 2008, we've been enduring a recession that just won't go away. But you'd never know it looking at the growth stats of flash sales sites. They experienced a 92% increase in dollar sales in 2010 and a 21% jump last year, according to first-quarter 2012 research by American Express Business Insights. And it's a similar story for daily deal sites such as Groupon and LivingSocial. The 600-plus deal sites are expected to more than double sales by 2015 — from $1.97 billion in 2011 to $4.17 billion, according to media research firm BIA/Kelsey.
This growth has meant bargains galore for a growing segment of consumers, including the novel concept of buying a discounted store or restaurant credit. Often these "$30 for $15" credits seem like a no-brainer, if the store appeals to you; it's like free money! But as is the case with many things in life, credits sold by flash sale and daily deal sites have their pitfalls and caveats. We've put together a quick guide to help make sure you get the most out of your purchase, and perhaps avoid ones that aren't worth it.
1. Watch for Pesky RestrictionsFine print and exclusions are common with restaurant vouchers. That 50% off dining deal may look delicious, and the restaurant may be one you frequent, but check first to make sure it isn't restricted in terms of the date you can use it, or what you can (or can't) buy. A voucher that excludes weekend dining, for example, might have you scrambling to find a convenient Tuesday night for a dinner date. Also check to see if the deal only applies to a special menu; if you had your heart set on trying a particular dish, such a restriction might degrade the value of the deal for you.
2. Is the Deck Stacked Against Stacking?Stacking, as any savvy shopper knows, offers a powerful way to save big: You take an already discounted item, apply a coupon, and then pop-out a half-price voucher as the crowning touch. However, if the voucher doesn't stack with other promotions, you may find that you'll save more by just sticking with the coupon and using the voucher another time. For example, a $30 credit that costs you $15 is 50% off, but 30% off your $50 total comes out to the same dollar discount. If you're planning on spending even more than that, the coupon would yield greater savings for your order than the voucher.
3. Expiration FrustrationFederal law is clear on gift cards; they don't expire for five years. But with vouchers, it's trickier. Expiration dates apply and are determined by the vendor, and they're often sooner than you'd expect. The good news is that Groupon reached a preliminary settlement last month in a number of class action suits regarding the expiration issue. Groupon won't sell more than 10% of its Daily Deals with an expiration date of less than 30 days, except for categories such as ticketed and time-limited events. Groupon also agreed to state on its vouchers that the purchase price of the deal does not expire, unless and until the voucher is redeemed or refunded. Expect other sites to follow this arrangement. Be sure though to factor in whether you can actually use the credit before it's set to expire.
4. The Invisible Purchase MinimumSometimes you have to spend a lot to save a lot. If you have a deal that requires you spend the full value of your voucher at once, then you could find yourself scrambling at checkout to hit that level. This isn't a huge issue for small credits, but big credits can cause headaches, particularly those for stores that carry higher-end goods. Say you have a $125 store credit offered by the fashionable flash sale site, Refinery 29 Reserve, but when shopping to redeem it, you find something you love for $110. Good luck finding another item for just slightly more than $15 to make the minimum.
5. How TaxingCredits usually can't be applied to shipping costs or sales tax. That means with any sort of deal you land at a flash or deal site, you need to be aware of taxes and shipping costs lest they wipe out your bargain. If you're buying the credit for a specific item, consider whether another store that perhaps offers tax-free checkout with free shipping may end up a better deal, even without the dollar-off voucher. The time to find this out is before you buy, not after.
5. Discounts at a DumpIn its early days, Groupon offered discounts at Chicago-area restaurants that had less-than-stellar reputations. Remember that deal sites, while they want happy customers, want to sell you something — and there's a business arrangement going on between the vendor and the deal site. You shouldn't wholly trust Groupon's spunky narrative more than a Consumer Reports, CNET, or a restaurant review. That half-price bistro voucher won't mean a thing if the entreés are tired and lukewarm when they arrive at the table. Always, always do your homework on a business you don't know.
6. The High-Price Shell GameWe've all driven by those imported rug stores that have huge "Going out of business" signs in the window, which essentially scream "Deep discounts. Everything must go!" But most of us steer clear, as the full retail price of many of these items was priced way too high to begin with. This sort or marketing happens on flash sale and daily deal sites, too. Not too long ago I bought what looked like a Groupon steal: $300 worth of merchandise for $150 from a Chicago home supply store. Voucher in hand, I visited the store hoping to pick up a few items to spruce up my place, and found that my $300 couldn't even buy a new faucet, let alone a bathroom sink, because of the inflated retail prices.
Though I could not get my money back, I called Groupon and requested credit for a future purchase. Then I went a step further (something you should do, too) and lodged a complaint against the retailer with Groupon for having artificially inflated prices in-store that rendered the Groupon deal more of a dud. Groupon takes these complaints seriously, and since then I haven't seen another deal featuring that retailer.
7. OversellingPopular deals may sell to the point of overselling, making vouchers and deals almost impossible to redeem. Case in point: Salon 505 in Austin, Texas sold more that 5,000 half-day spa package deals on LivingSocial last year — enough to book every appointment for the year-long expiration term. Sometimes, overselling can even put a vendor out of business: In late 2011, Drew's Eatery, a vegetarian restaurant in Chicago, became the first store to go bust from selling too many Groupon vouchers. As a consumer, to avoid situations like these, it's best to redeem a voucher as soon as it's practical. You'll likely get a refund if you can't redeem your credit, but the disappointment of losing out on an anticipated deal has a high price emotionally speaking.
Store and restaurant credits usually offer a great deal for consumers, if the vendor is one that fits your lifestyle and if the deal can be redeemed in an appropriate amount of time without forcing you to buy more than you want. If you don't take these factors into consideration however, you may be disappointed when it comes time to cash in.
Readers, have you encountered any other surprising restrictions to store credits? Sound off below!