Small and large businesses have used consortium, collectives and buying groups for years: A group of smaller retailers in a given industry join forces to buy in bulk and get the best prices from manufacturers. But the internet has now put this type of buying power in the hands of consumers.

Discount websites like Groupon and others offer special deals specific to your city — but only if a pre-determined number of people sign up for the deal. If the website doesn’t meet the minimum quota for buyers, the discount is not valid and your credit card won’t be charged. You can’t lose, because if the Groupon doesn’t meet the quota, you pay nothing.

Each deal lasts an average of 24 hours, although some last longer. It’s up to users to spread the word to their friends to sign up for the deal, that way the minimum will be met and everyone will enjoy the savings.

The Groupon website points out that, with millions of members, you don’t have to get your friends to sign up to make sure the quota will be met — but it definitely helps. This website runs on social networking, and if everyone decided they didn’t need to promote Groupons, the quotas wouldn’t be met and the deals would go away. But you can get away with sharing only those deals that you think your friends and family would really enjoy; the power of social networking momentum does the rest.

You can also earn $10 when someone you invite to Groupon buys their first Groupon, so that’s added incentive to get your friends involved.

What Can You Buy Through Groupon?

Looking at recent deals, most got more than 150 buyers, with many getting 200 or more. Most of the recent deals are “things to do” — tickets to the children’s museum, wineries, a 50% discount on limousine service. Other recent offers include restaurant or specialty food store discounts. Groupon describes their offers as “unbelievable deals on the best stuff to do, see, eat, and buy in your city.”

If you have out-of-town visitors, not only does Groupon provide a great way to get savings on fun things to do locally, but you may even discover new places you didn’t know about. If you’re going on vacation, this is also a good way to save money on tourist attractions and restaurants. That’s why Groupon calls itself a “deal site and city guide.”

Money-back Guarantee

The best thing about Groupon? (And possibly the most unusual?) They offer a money-back guarantee on all deals. The company calls this policy the Groupon Promise, and the website states: “…if Groupon ever lets you down, we’ll return your purchase—simple as that.”

Of course, they post a few caveats. If users take advantage of the money-back guarantee, they’ll have their account closed. And if too many people request frivolous refunds too often, Groupon will have to change the policy. But so far, according to Groupon, it’s worked out well since the website launched.

One other thing to note: If you do request a refund, it could take 3 to 5 business days for the refund to show up on your credit card. Groupon releases the money as soon as a refund request is made, but credit card companies may take up to five days to process the request and credit your card.

Groupon also has a user discussion board where you can post feedback about deals, which helps Groupon improve on its choices of offers.

There are other websites like Groupon, too. This article outlines several other group deal sites.

Of course, if you want to take Groupon to an extreme, you can become a Groupon groupie like Josh Stevens of Chicago, who decided to tour across the U.S., living on nothing but Groupons for a year.

Groupon Pros

  • Money-back guarantee
  • Average savings of 50% or more on restaurants, tourist attractions, and other purchases
  • Easy to use
  • No risk — if not enough people sign up for the deal, you pay nothing
  • $10 referral program gives you a chance to earn money

Groupon Cons

  • Must check the site frequently so you don’t miss out on deals
  • Must spend time social networking to spread the word if you want to earn money through referrals or help deals meet the quota