For coupon overreachers, a chance to recoup

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By Beth Teitell
Globe Staff / March 9, 2011

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In the next two months, Laurie MacDougall needs to eat 10 pizzas, take two beading classes, get at least one picture framed, have her car washed twice, drop off $30 of dry cleaning, visit the Isabella Stewart Gardner Museum with three friends, eat at Johnny’s Luncheonette in Newton and Deep Ellum in Allston, and schlep over to Burlington to buy books at the Used Book Superstore.

Otherwise, $250 of discount coupons she bought from Groupon and other online daily deal sites will expire, unused.

“There just isn’t enough time in the day to do it all,’’ said MacDougall, 47, a cancer registrar at St. Elizabeth’s Medical Center. “I made a spreadsheet, and it’s so sad, they’re all coming due.’’

Luckily for MacDougall and Frederick Thum, of Cambridge, who bought three Groupons for Nashoba Brook Bakery only to realize he was driving an hour for a loaf of bread, and Andrew Pelissier, of Hanover, who spent $100 for discounted limo services and can’t round up friends for a party, a secondary, or resale, market has emerged.

Sites like DealsGoRound, CoupRecoup and Lifesta, which recently got $1 million in private funding, give consumers a place to sell those deals they couldn’t pass up but also couldn’t manage to use. All three were inspired by the founders’ own experiences, with deals they missed the first time around, or vouchers that expired.

As Kris Petersen, founder and chief executive of Chicago-based DealsGoRound, put it: “Who doesn’t want to take a Segway tour?’’ He doesn’t, as he learned after spending $160 on a tour for four people, and watching a summer elapse without finding the right moment.

These folks all fell under the spell of the hottest craze in retailing. Groupon, LivingSocial, and hundreds of other sites like them send subscribers e-mails offering deep discounts on everything from facials to helicopter lessons to local restaurants. Many of the offers come with tight deadlines, which, combined with fantastic bargains, sometimes prompt consumers to click “buy’’ on things that they may not really want.

The deals often create surges in business and new customers for retailers, but some find themselves overwhelmed and unsure whether the uptick in business was worth sharing revenues with whichever daily deal site they’re working with.

Groupon, LivingSocial, and BuyWithMe won’t reveal their redemption rates, so there’s no way to know exactly how many discount power yoga classes will go untaken, how many bargain faux tans will go unsprayed.

Estimates, and one small study, put redemption rates between 70 and 90 percent. Yael Gavish, a cofounder of San Francisco-based Lifesta, estimates 20 percent of coupons aren’t redeemed. A survey of 100 retailers by Yipit, a site that aggregates deals from Groupon and 360 other companies (yes, there are that many), found redemption rates between 80 and 90 percent.

Christa Hagearty, president of the Quincy-based Dependable Cleaners chain, said salespeople for two big daily deal sites told her 20 to 30 percent of coupons are never used (although she said the cleaner’s redemption rates have been higher).

Here’s what we know: With sales of daily deals coupons projected to exceed $5 billion globally this year, according to Lou Kerner, an analyst with the Los Angeles-based Wedbush Securities, the number of consumers experiencing “Groupon remorse’’ is growing.

“You have these grand plans in your head about what you’re going to do,’’ said Betsy Hochadel, 28, a night student at Suffolk University Law School who works in financial services. “Part of the disappointment is that you never got your life together enough to do something new and exciting.’’

Coupons go unused for a variety of reasons. The buyer realizes she doesn’t want to skydive or get facial hair lasered off, or she moves or breaks up with her boyfriend. But perhaps no excuse is so quintessentially Boston as the one that prevented Hochadel from using her 50 percent discount at Café 47, in the Back Bay.

“I couldn’t find parking,’’ said Hochadel, who lives in Newton. “So I drove home and decided to find another way to get rid of it. I figured even if I took a small hit, I’d spend more on gas driving back to the city than I was saving.’’

She sold her $15 Café 47 voucher (for $15), on Lifesta, which charges sellers 99 cents plus 8 percent of the sale price, meaning it cost her $2.19 to unload the voucher. DealsGoRound levies a flat 10 percent of the sale price, and CoupRecoup, like Craigslist, is free. CoupRecoup cofounder Aren Sandersen said the site is not charging, but is “looking to find revenue options at the end of this year.’’

Sellers typically don’t charge more than they paid for their coupons, but simply recouping their original investment, or something close to it, can make them feel as if they’re earning money. “That money is already spent and gone,’’ said Pelissier, 23, a trade compliance officer who’s trying to sell Groupons for limo services.

If no buyer emerges for the limo ride, he said, “Worst case, I just get picked up from work one day and go for a ride with my girlfriend.’’

Reselling vouchers is easy. On DealsGoRound, the site first verifies the seller’s identity with PayPal, then the seller inputs the deal specifics — price, expiration date, etc. — and uploads the electronic voucher file. The deal is listed on the site, and an interested buyer is redirected to PayPal. Once PayPal alerts DealsGoRound that the payment has gone through, DealsGoRound transfers ownership of the voucher to the buyer (and ideally a new round of remorse does not set in).

Perhaps the most painful aspect of the unused coupon is its self-inflicted nature, making it worse than an unused gift card, because at least in that scenario someone else is to blame. You’d think that people would know their own preferences, said Michael Norton, an associate professor at Harvard Business School, but it turns out they often don’t.

“We have some data showing that if you examine people’s iTunes queues, many have hundreds of dollars of music they’ve never listened to once,’’ he said.

“Part of what causes this behavior is that we think we are going to be someone we are not. You don’t ever get massages, but you kind of like the idea of getting a massage, and someday, years from now, you may actually get one. But right now you have this deal that tells you that you can be that person next week. The problem is, you’re just not really the kind of person who gets a massage.’’

The good news for procrastinators is that discount coupons don’t lose all their value after the expiration date. While they can no longer be redeemed for the promotional value, they are still worth the amount the buyer originally paid, said Jason Lefferts, director of communications at the Office of Consumer Affairs and Business Regulation. Under the state’s gift certificate law, the coupon retains its value for seven years. A $10 coupon that entitled the buyer to $20 worth of bowling fun would be worth $10 once the expiration date passed. Disgruntled consumers in other states have filed lawsuits against Groupon and LivingSocial over expiration dates and other issues. The cases are pending.

The bad news? The person who can’t get to the bowling alley even with a big financial incentive probably can’t get there in its absence.

“To be honest, I’m not going to Mantra,’’ said MacDougall, who let a $20 Groupon for $40 of dining and drinks at the French-Indian restaurant expire. “I’ve realized I’m just not the kind of person who goes to trendy places.’’

Beth Teitell can be reached at