A recent photography deal offered by Groupon in Atlanta provides users of the service with a cautionary tale on some of the potential pitfalls in buying from the popular site -- with lessons to be learned for both customers and merchants:

A local "photographer" in Atlanta offered:

$65 for a One-Hour Photo Shoot, a DVD of the Images, an 8”x10” Print, and 20% Off Additional Prints at Dana Dawes Photography (Up to $500 Value)

She managed to sell 1,175 packages to Groupon users before discussions of photo fraud ultimately forced Groupon to refund everyone's money and withdraw the deal.

Some users who were also professional photographers grew suspicious that some of her portfolio of photos had been "stolen" from other photographers. One user was able to trace one of her photos back to the source photographer.

Whether the photos in question were stolen outright or somehow licensed via use of stock photography is not clear. Royalty-free stock photography is commonly used on websites and in advertisements, but for a professional photographer to claim that these photos were part of their own portfolio of work on their website would definitely be fraud / false advertising -- and likely not allowed under the photo license.

That appears to be the reason that Groupon pulled the deal and refunded money to purchasers,

But additional valid questions were raised by users that highlight some troubling aspects of Groupon and its immense popularity. Having sold 1,175 such packages before pulling the deal -- many users familiar with professional photography work questioned whether an individual photographer could fulfill the deal to 1,175 individuals within the 1 year expiration date. They felt a professional photographer could not meet the schedule or endure the costs associated with fulfilling the deal based on the anticipated revenue that the deal would ultimately bring in to the merchant.

Groupon reportedly responded that limits on number of deals sold and the ability to fulfill those deals within the coupon expiration period is left up to the merchant to decide. This policy poses a potential pitfall for customers as well as merchants.

My advice to customers is that they should closely examine any expiration dates and also the ongoing number of deals sold to evaluate whether it makes sense to buy into a deal or not. Can the merchant perform the number of deals sold? Are reservations and appointments required?

Merchants should be aware that offering Groupon deals can generate thousands of potential customers who will need to be served. Can they handle the volume? Are they going to turn a profit on the deal or at least break even?

While it is an opportunity for merchants to get thousands of new customers, it is also an opportunity to alienate those same customers if their needs are not properly provided for.

My personal advice to merchants would be to make sure you at least break even on the deal you provide, as Groupon has such a large following it is likely you will sell thousands of such deals -- and you don't want to be taking a loss on each one. You want to be happy with having all the new customers, and making sure you break even will hopefully ensure that.