Saving money socially through group coupons

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March 31, 2011 - 7:00pm

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As the economy struggles to recover, people have been forced to find new ways to make their paychecks stretch. One money-saving tool in particular has exploded in the U.S. marketplace, to the tune of more than 50 million users. For the last few years, American pocketbooks have started filling up not with cash, but with coupons. Group coupons, to be exact.

The notion of social buying has grown tremendously over the last few years, with companies popping up nationwide. The idea is simple: members receive access to daily deals that only go into effect when a certain threshold of buyers is reached. Discounts range from twenty-five to ninety percent off goods, services, even trips.

Roger Butters, assistant economics professor at the University of Nebraska-Lincoln and president of the Nebraska Council on Economic Education, said the surge in group coupons just makes sense.

"You know for years and years and years, if you wanted to save money on your shopping, the way to do that was to get a copy of the local newspaper and clip coupons," he said. "But as people have moved away from paper newspapers and have moved towards online news, it's a natural process that coupons would also move online as well."

The concept of group buying isn't new, Butters added, but the internet makes it much easier. "I mean it's always been the case that if you took you and your friends to a furniture store and you all agreed to buy sofas, you would probably be able to negotiate a much lower price for each individual sofa," he explained. "And now being online, it makes it easier for people to get those groups together to negotiate that price."


Courtesy photo

Nikky Pierce often combines coupons and offers to purchase items in bulk, which she stores in her basement. When group coupons companies started staking out Nebraska, Pierce was quick to adopt the new model.

In this way, both the sellers and consumers save money, which Butters said "is always a good thing."

For avid couponers like Nikky Pierce, who runs the coupon website Chicks Dig Deals out of her Lincoln home, the model can be a dream come true.

Pierce, who describes herself as an "extreme couponer," also teaches a class at Lincoln's Southeast Community College on how to get the most bang for your buck via coupons.

She first heard about group coupons on a morning news show, before they'd reached Nebraska. Since then, two national group coupon companies have opened shop in Lincoln and Omaha: Groupon and Living Social. Pierce quickly became a fan, and posts the best deals on her website. She said she's purchased vouchers for dining, health and beauty products, and even Halloween costumes. They've also come in handy for the daycare she runs out of her home.

"I think that groupons kind of allow people in this economy to be able to get things that would be more of a splurge than a box of cereal, or things that we use everyday," she said. "Like, I don't have to pay for a professional photographer, but that's something I can splurge on."

Groupon and Living Social account for ninety-two percent of web traffic nationally in the group-buying market, according to a December 2010 report by research and analysis firm Experian Hitwise. After rejecting a Google offer of $6 billion, Groupon has been eyeing an initial public offering that could place the company's value as high as $25 billion.

Within Nebraska, the Kearney Hub and Lincoln Journal-Star newspapers have started city-wide group coupon programs, and UNL marketing professor Roger Simons expects many more will emerge.

"I would guess there's a lot of incentive out there, because the barriers of entry are fairly low. I could see a radio station doing it, I could see, you know, television stations and traditional media doing it," he said. "I think you'll see a lot more local-type companies growing up and getting involved in it."

After our conversation, heavyweights like Facebook, Google, Microsoft and even the New York Times announced they were exploring variations on the group coupon model. (See the linked graphic at the top of the page)

Generally, consumers seem pretty happy with the process; Groupon and Living Social are rated A minus and A plus, respectively, by the national Better Business Bureau.

And what about the businesses offering the coupons?

According to Maire Griffin, director of communications for Living Social, ninety-seven percent of merchants who've participated have indicated they would do so again. In terms of vouchers bought, if not necessarily redeemed, Griffin said Nebraskans have saved more than two million dollars through group coupon purchases.


Photo by Hilary Stohs-Krause

Stella Clothing, located in downtown Lincoln, sold more than 600 Groupons in January.

Stella Clothing, a women's boutique in downtown Lincoln, sold its first group coupon in January, said co-owner Sheilah Glasco. For twenty-five dollars, purchasers received a fifty dollar store voucher. Stella ended up selling more than six hundred vouchers through Groupon, greatly exceeding their expectations.

"We actually kind of got nervous," she said. "So we stopped it a little bit early."

But so far, she said the experience has been positive. Purchasers have redeemed one-hundred-sixty-two Groupons as of March 11; the coupons expire in July.

However, marketing professor Simons said there is potential for problems on the merchant side. If the coupon only brings in current customers, for example, instead of driving new consumers, or if people only spend the value of the voucher, stores could lose money. Additionally, too much coupon-driven business could flood a merchant - for example, if a massage studio sells hundreds more group coupons than expected, purchasers could find themselves waiting months just to get an appointment.

But Butters, the UNL economics professor, said these kinds of issues aren't specific to the group coupon model.

"Can business maybe have a bad experience with this type of coupon? And the answer is of course," Butters said. "They may not have accurate expectations, they might not accurately prepare for what the coupon's going to bring. But at the same time, this is nothing new."

He pointed to safeguards sometimes included with print coupons, such as limiting the voucher to stock on hand.

Glasco said at this point, she'd probably offer another group coupon in the future, but it all depends on how the numbers work out when the deal expires in July.

Is interest in group coupons likely to decline as the economy picks up?

Simons doesn't think so. Instead, he said he thinks society has reached a "new normal."

"I think people are used to this kind of couponing, and you'll see more and more of it," he said. "And I think because of the digital nature of this, and the ease of spreading it, people are going to come to expect it, to a certain extent."

And group coupons stand out from traditional print coupons, Griffins with Living Social said. They don't just offer a fifty percent discount on eggs or a thirty percent discount on an oil change; instead, they offer deals on experiences.

She pointed to a deal offered in Washington, D.C., in February that offered a discount on skydiving: 3,700 people purchased the voucher. "And it's probably safe to say that 3,600 of those 3,700 didn't wake up in the morning thinking, I'm going to go jump out of a plane today."

While Living Social has no specific plans to move into lesser-populated areas, Griffin said they're interested in spreading wherever there's demand.

Interestingly, despite Glasco's positive experience on the merchant side of Groupon, she admitted she hasn't ever used one herself.

"I haven't," she said with a laugh. "You know, sometimes as a business owner, I think I just look at a lot of emails anyway, and so maybe I just overlooked it sometimes, but I definitely think that I'll be looking at it more closely."


Photo by Hilary Stohs-Krause

Stella Clothing co-owner Sheilah Glasco rearranges a dressing room at the women's boutique in February. She said the process to set up a Groupon offer "was really easy."



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