Discounts are always a draw but remember, if the deal is too good to be true...

Published on Monday 18 July 2011 17:37

Vouchers – online or printed – are a thriving business in times of austerity

LONG-FORGOTTEN habits can come to the fore in times of austerity, whether it's bottling loose change or taking packed lunches to work.

Discount vouchers can be added to that list, having well and truly shaken off their "Christmas gift" image to become the biggest money-saving story of the past two years.

It has been estimated that more than ten million Britons have used an online voucher code (also known as discount codes, e-vouchers and promotional codes) in the past year - and that doesn't include vouchers for high street stores and restaurants that have been printed off the internet, packed in gift cards or taken out of papers and magazines.

Their popularity has soared to the extent that online voucher market leader Groupon, which launched less than three years ago, is preparing for a stock market flotation, in which it hopes to raise more than 450 million.

Imitations have, unsurprisingly, popped up left, right and centre, with Groupon's biggest rival, Living Social, also lining up a public offering.

But this growth can also present new problems as the market becomes saturated, with the pitfalls quickly becoming evident. For consumers, it all boils down to that old chestnut - it is too good to be true?

Gavin LittleJohn, chief executive of Edinburgh-based Moneydashboard.com, said: "Voucher schemes can be effective if the user is very selective, focusing on value, rather than price.

"Many people end up with 'bargains' that they simply don't need. Vouchers can save money on planned purchases, but are at their most useful in just making everyday goods such as groceries and fuel more affordable."

There are two types of savings voucher operators. The first group specialise in offering local daily deals that are available for a 24-hour period only.They operate through affiliate relationships, where businesses offer heavy discounts and pay the site a percentage of each code or voucher it sells.

For example, if you live in Edinburgh and sign up for Groupon, you can access daily deals in or around the capital on anything from restaurants, hotels and spas to haircuts, sporting activities and golf days. Groupon is the best-known but others are rapidly building up a following, including livingsocial.com and kelkooselect.co.uk.

Their success lies in appealing to the desire for a good deal. A canny user may receive e-mail offers every day for six months without taking any up. For others, however, the temptation to claim a big discount on something they want but don't need can be too great.

A deal only applies when a minimum number of people sign up to the offer, to ensure the organisation promoting it is guaranteed a certain amount of business.This can be the downfall, however. For example, users of sites including Living Social and Groupon, including our case study, have complained that some businesses offering discounts have taken on more business than they can handle, leading to cancellations or sub-standard service.

It has also been claimed that the offers are biased towards women, with a heavy weighting towards haircuts, spas and beauty treatments. And the best-known brands tend to be conspicuous by their absence, presumably because they don't need to slash their prices to attract custom. The deals can also be limited geographically, as they are typically offered only in the UK's bigger towns and cities.

Simon James, shopping expert at Moneysupermarket.com, said the key to using such sites is to ensure the deal is relevant to you.

He said: "The products available have to be discounted by up to 50 per cent and there are huge savings, whether it's a weekend away, beauty treatment or a meal out. But while the daily deal might seem attractive, you have to ask if it's something you already want."

The daily element also means there's little variety, while you have to check back each day to see if there's something you want.

"The deals are very popular within the health and beauty sectors, but there can be catches. For example, you might get one treatment for half price, but you're required to buy five treatments as part of the deal," said James.

The second group of voucher and discount sites are those that warehouse hundreds or thousands of deals at one time, allowing users to search by brand and sector.

They include myvouchercodes.co.uk, vouchercodes.co.uk. voucherseeker.co.uk, smartvouchercodes.co.uk and hotukdeals.com, some of which have more than 2,000 promotions on offer at any one time.

The sites, which earn a commission on each sale made through a voucher code, allow users to search by product and brand name, or to browse their exclusive deals and their most popular codes and printable vouchers. The majority of voucher codes are for online purchases - most have iPhone applications allowing consumers to find deals when they are out and about - but printable vouchers are also available.

James said: "You're effectively costing yourself money if you don't use them. If you're shopping online, spend ten or 15 minutes to see if you can save money on your purchase. If you're buying it anyway you'll be making useful savings."

But the sheer scale of such sites can be offputting, as is the in-your-face design. Users have also reported clicking through to deals only to find that anyone going directly to the provider's website gets the same so-called exclusive offer. The listing for 40 per cent of Expedia holidays is no more than an advert, with any visitor to the Expedia page seeing the same offer.Some can also be south east England-oriented, particularly smartvouchercodes.co.uk, where the restaurants for which there are codes are all based in London. There's also a tendency on certain voucher sites to list deals that have expired and boast exclusives that don't exist, an approach that is sure to drive people away in such a competitive market.

But as the financial squeeze intensifies, those drawbacks are unlikely to deter millions of people from taking advantage of voucher codes over the coming years.