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elgato
Joined: 24 Feb 2005
Posts: 17240
Location: Texas
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| Posted: Tue Jun 21, 2011 4:05 pm Post subject: Groupon: Daily Deals And The Potential For Fraud |
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In my post about Groupon’s potential for collapse, I talked about the possibility of merchant fraud. Because Groupon pays merchants everything within 60 days, they are exposed to the possibility of fraud or the merchant going out of business. Other deal providers pay even faster. LivingSocial pays out everything in about 15 days. Google Offers pays out 80% in about four days.
Nobody knows how much fraud occurs, or what steps are taken to prevent it. Groupon’s S-1 identifies refund reserves (which would cover more than just fraud) of $14 million in 2010 and $26 million in the first quarter of 2011. The first quarter number represents 4% of revenue. The S-1 also mentions both consumer and merchant fraud as risk factors.
Groupon does take steps to mitigate both kinds of fraud. On the merchant side, the fact that it withholds full payment for 60 days helps it weed out fake or closed businesses (consumers complain directly to Groupon). Groupon also tries to vet businesses in the first place by looking at online reviews, Yelp, and other sources.
But these measures are not full-proof, and the issue is not only with Groupon. The structure of the daily deals business makes it ripe for fraud and other abuse: upfront payouts, no recourse if something goes wrong, no collateral and minimal risk assessment. You can take the money and run.
Fair warning: the rest of this post may make your head spin.
more.. link to news article |
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pbreit
Joined: 11 May 2011
Posts: 82
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| Posted: Tue Jun 21, 2011 9:25 pm Post subject: |
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| Rocky's whole series is a little extreme. I don't think he has an axe to grind but it sure comes off as such. |
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elgato
Joined: 24 Feb 2005
Posts: 17240
Location: Texas
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| Posted: Fri Jul 22, 2011 8:07 pm Post subject: Re: Groupon: Daily Deals And The Potential For Fraud |
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The latest:
"Groupon faces Congressional questions over its new privacy policy"
Reps. Ed Markey (D-Mass.) and Joe Barton (R-Texas) today sent a written inquiry to Groupon Inc. seeking information about the company’s privacy practices.
Groupon recently revised its privacy policies to allow the company to track mobile consumers’ locations even when their Groupon apps are closed. The policy changes come as the daily deal leader continues to expand the breadth of its Groupon Now tool, which uses geolocation technology to offer deals to consumers based on their present locations.
“If you use a Groupon mobile application and your mobile device’s settings allow it, we may collect mobile location information from your device. Our application may be designed to collect information even if you are not logged into the Groupon application,” reads the policy.
more.. link to news article |
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