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Great forum first of all. To add my nickels worth:

I own and operate a small and new site called PickMePickMe.com and we are just in the early days (open for 2 odd months) and we have saved our clients nearly 10K so far and with the little or less in startup dollars we needed we are learning a whole deal about the industry. Especially as we stab test/survey our clients. We found that around 50% of our clients earn 80K and above and a likewise percentage returns to the business to pay full price.

I think yes that the industry needs significant numbers of changes:

Transparency and Clarity: consumers need to be savvy and read the fine print and vouchers and cannot rely on screaming foul play, although the information was clearly there. Business’ should have all the information required clearly available on these deals should be tested through a mystery shopper or something there alike.

Merchant Education: I think there needs to be of level of responsibility for each Deal Site Operator to educate the merchant. I can mention countless business that we have approached that have dealt with some of the big Deal Operators before and would never do this again. Merchants need to know that that Deals should never be viewed as Revenue Source but a Marketing Expense. I always say to merchants that we will get people into the door and it is their job to make them come back. Otherwise Deals are a loss to the best of business.

Fraud Tools: we have pioneered a fraud mechanism which ensures that users cannot Photocopy or Multi-use their vouchers. I have spend year working in risk and fraud in the American Express Travellers Cheque Business hence have developed this new tool. When spending time with merchants I was baffled how they could consolidate their vouchers especially if they had multiple locations.

Overall I think the industry has a great role to play in the consumer buying behaviour post and during the recession since late 2007. It is ever so important for business to recognise this new behaviour and adapt.

Above all I think the fundamental of our large competitors is severely flawed as the model does not work with large fixed cost like editors and city offices. This industry needs every player, and I mean merchants and deal sites, to stay as lean as possible and near to 100% variable. Otherwise someone always ends up bleeding and unfortunately sometimes it is the customer.