Are daily deals actually bad deals for consumers? A recent case study by community marketplatce Thumbtack.com found that the “regular prices” quoted by Groupon and LivingSocial often were higher than the prices quoted by the same merchants. PYMNTS.com spoke with Thumbtack.com’s Sander Daniels to get his advice for consumers in light of these surprising findings.
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PYMNTS.com: According to your recent case studies, to what extent are daily deals in actuality good bargains for consumers?
SANDER DANIELS: In general, we think that daily deals are good bargains for consumers. For example, it is clearly a good deal if you spend $10 on a coupon that gets you $20 of groceries at Whole Foods.
We think the problems can start when you buy a coupon from a company that doesn’t publish a “regular”’ price for what they are offering.
Our recent studies focused exclusively on deals for local services like house cleaners, painters, and photographers. Many merchants who offer these services do not publicly publish their “regular” rates. It can be very tough for a consumer to know whether they are actually getting a good bargain when the merchant doesn’t publicly advertise their “regular” rate.
PYMNTS: Are the regular prices quoted by daily deals sites the same as the merchant’s? What were some of the most surprising examples you discovered?
DANIELS: In 8 of the 10 deals we reviewed, the “regular” prices quoted by Groupon and LivingSocial were higher than the prices quoted by the same merchants when we called them.
The most surprising example we found was a deal for two hours of house cleaning in Phoenix that was advertised as regularly costing $150. But the price we were quoted over the phone was $80, 47% lower than the regular price advertised.
PYMNTS: Why might daily deals sites be inflating prices? Is this for the benefit of the merchants, the daily deals companies themselves, or both?
DANIELS: Our study suggests that some daily deal discounts for local services are inflated. If this is true, we don’t know whether this is the fault of the daily deal site, the merchants offering the coupons or some combination thereof.
The benefit of advertising a high “regular” price would be that it could make a deal look very attractive to consumers. Consumers are probably more likely to buy a deal that is advertised as “57% off!” than a deal that is advertised as only “15% off!” The higher the discount, the more people would likely buy the deal, which presumably benefits both the daily deal site and the merchant offering the coupon.
PYMNTS: Given your findings, what advice would you offer to daily deal users?
We’d suggest that daily deal buyers do a bit of research and use basic common sense before buying a deal. Whether you’re getting a bargain is obvious for most deals, because you know the exact “regular” price of what you’re buying.
But we’d suggest that consumers do a bit of research before buying a deal for a local service, particularly if the “regular” rates of the merchant offering the deal are nowhere to be found. It’s very tough to know whether you’re getting a good deal in these cases.
PYMNTS: If you had to recommend one daily deal site for consumers, which one would it be?
DANIELS: We don’t take sides in the daily deal wars. :-)
Sander Daniels is a Co-Founder of Thumbtack.com. Thumbtack is a community marketplace for you to list, discover and book local services. More than 200,000 small businesses and independent professionals have listed their skills on Thumbtack.
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