Groupon Silent as Thumbtack Tweaks It on Deals

NEW YORK ( MainStreet) -- Groupon's entire business is built on the promise it can offer consumers unique deals of half-off or more, but when it comes to local services, a shopping site argues that Groupon buyers are being hoodwinked -- and Groupon has no response.

Emailed for response Wednesday by MainStreet and TheStreet after the Thumbtack attack went live, its findings posted everywhere from VentureBeat to The New York Times, Groupon remained silent for a day and finally emailed to say it was declining to comment.
Groupon deals seem cheap, but on some offers the original prices may be inflated.

Until then, even its own blog failed to offer even the scantest defense or boilerplate non-denial denial. Instead, the Groupon blog had this Wednesday: "Puppies wield a special power over humans." (To be fair, that wasn't an attempt to distract people from the issue. Or, if it was, it seems fair game -- that opening line came from a post about a charity that "connects teenagers who are emerging from homelessness with volunteer opportunities at local animal shelters.")

To recap, Thumbtack, an online marketplace for local services, analyzed a series of Groupon deals for housecleaning, repair work and other services offered by local professionals and compared Groupon's asking price for these services in select cities to its own data on the average going rate. Sure enough, Thumbtack found there were at least five instances when Groupon valued a deal at well above what the service costs on average.

In August, for example, Groupon advertised an offer for two hours of maid service in Chicago for $22.50, half the $45 the site said this service would cost normally. Yet, according to the 62 listings for the same service in the same city on Thumbtack, the average asking price of this service is just $20, or less than the amount one ends up paying with the deal.

Other cases were even more extreme. Groupon posted one deal in February advertising two hours of handyman services in Seattle for $39.50, a 64% discount from the $110 the site said it would cost normally. However, Thumbtack analyzed more than 50 listings for this service in Seattle and found the average going rate was $42. While that is still a few dollars more than the Groupon deal, it shows the supposedly huge discount is actually a pretty common asking price, and as Thumbtack points out, if this is the average, there are likely plenty of options that are even cheaper.

Of course, these findings come with several caveats. For starters, Thumbtack analyzed only the deals Groupon offers for local services, something that accounts for just a tenth of all Groupon deals and could therefore be an exception rather than the rule. What's more, Thumbtack is itself a marketplace for local professionals to advertise services, which means it competes with Groupon in this space and is certainly not unbiased in putting out this study. Perhaps unsurprisingly, Thumbtack even took the opportunity to advertise its own service within the report.

That said, the larger point raised by the report is worth considering: Just because something is 50% off doesn't necessarily mean it's the best deal.

Groupon may well be right to list a higher rate for a particular service than the market average if that service is provided by a more prestigious business, but as with any purchase, consumers need to keep in mind two points: how the sale price compares with the normal price offered by that company, and how the sale price compares with the normal price offered on the market. So before you make an impulse buy on a daily deal site, take a few minutes to shop around online to see if you can get the same product for less elsewhere. If you can't, you know it's really a good deal.

(Hat tip to VentureBeat.)

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