Grandaddy of deal sites launches first Kiwi deal - Updated

Groupon is the company that started the group deal craze that now saturates our inboxes every day. GrabOne, Groupy, Treat Me, Daily Do... they all follow the template that Groupon pioneered.

Now Groupon has launched in New Zealand and its first deal is a $499 5 night Fijian getaway for two.  They're starting at the opposite end of the spectrum than GrabOne, which launched - very successfully - with $4 movie tickets. Still, a 5 night Pacific island holiday for two and under $500 - the Groupon bandwagon might start getting very crowded, very quickly.

The marketplace for these deal sites is super crowded and Groupon needs to make a splashy entry if it has a chance of competing. Despite its status in the group deal world, it might not have the same level of name recognition as existing sites like GrabOne and Groupy. In a country as small as New Zealand, with multiple companies competing for the same business, it will come down to who can get the best deals to market.  That's good news for the consumer!

However, not everything has been smooth sailing for Groupon or similar sites. There have been - unsubstantiated - claims that Groupon has encouraged vendors to artificially hike their prices in order to make the deal profitable on their end. In a comment on TechCrunch, a man claiming to be the owner of socialprintshop.com said he had been approached by both Groupon and Living Social to offer deals. He said the sales rep told him to double his prices so a) the deal looked better on paper (a larger percentage drop) and b) the deal remain profitable for the retailer, after taking into account the ~50 percent commission Groupon charges. See here for more (scroll down to the comments section).

Who knows how widespread that practice is, or if it applies in New Zealand. Either way, it'll be interesting to watch these group deal sites battle it out while our wallets reap the rewards.

Update: The fine print on Groupon's site notes that flights are NOT included. Suddenly the deal seems a lot less attractive.

Update 2: To add to the worries about Groupon - and the companies that use its business model - The Atlantic has published a long piece discussing how the service can work, despite it being a generally bad deal for the vendors.

"One study found that 32% of Groupon merchants lost money (with restaurants faring worst) and 40% said they wouldn't do it again; even people who made money had staff problems due to high volume and, er, cheap tippers."