Groupon groupies

The LivingSocial coupon , top left, that Kate Adams would use at M Restaurant. Polly Chung, top right, hands in a Groupon for a discounted massage at Just Calm Down Spa in New York City. She buys "great deals" daily, and has a stockpile stretching into April 2012. Above, Adams hands her coupon to waiter Rich Kodis at M Restaurant.
The LivingSocial coupon , top left, that Kate Adams would use at M Restaurant. Polly Chung, top right, hands in a Groupon for a discounted massage at Just Calm Down Spa in New York City. She buys "great deals" daily, and has a stockpile stretching into April 2012. Above, Adams hands her coupon to waiter Rich Kodis at M Restaurant. (MICHAEL WIRTZ / Staff Photographer)

Admitted addicts feverishly snap up daily deals dangled by websites. But using them all - that's the challenge.

Posted: August 03, 2011

Part of Polly Chung's morning routine, while sipping her coffee, is to peruse the 100 or so daily e-mail alerts that stream into her in-box each night. They come from Groupon, LivingSocial, and dozens of other deal-a-day websites offering hefty discounts at nearby businesses that bank on a consumer's compulsion to seize a good deal before time runs out.

More often than not, Chung, a middle-aged New Yorker, buys something - two-for-one movie tickets or maybe a visit to the acupuncturist - and adds it to a spreadsheet she created to track the hundreds of deals she's purchased.

"I'm a Groupon-aholic," says Chung, happily. "It would be a rare day that I don't buy something, because there are so many great deals to be had! I'm literally into April 2012 with my Groupons."

The avalanche of deal-a-day websites, including Philadelphia Media Network's Dealyo and Philly Daily Deals, has created an army of addicts who can't seem to resist the lure of a discount. With typical offers of goods and services marked down 50 percent or more and the economy taking a toll on people's leisure budgets, millions have caught the digital discount fever. Groupon users alone total 83 million worldwide. "We want Groupon to be an addiction you can feel good about," the company website reads.

Kate Adams of the Cobbs Creek section of Philadelphia runs with the addiction. Having purchased about 150 Groupons since she signed up in early 2010 - an inexpensive way to try new restaurants - Adams eats out a few times each week. "My friends make fun of me," she says. "But they benefit from it."

Consider Groupon-aholics the online cousins of Sam's Club or BJ's devotees - people who go weak in the knees for a reduced-price 18-pack of Grey Poupon. They may not need the products, but how can they pass up such a deal?

"It's a progressive disease," says Chung, who recently imposed an embargo on buying haircuts and massages.

Yet with that kind of enthusiasm often comes a backlog of deals. It's not uncommon for Chung to encounter scheduling conflicts - say, double-booking a massage and a reflexology appointment for the same afternoon - and it can be challenging to use her discounts before they expire, which often happens months after the purchase date. In fact, between 10 and 20 percent of all discounts purchased from Groupon go unused, the company says.

Luckily for impulsive purchasers, a handful of websites are cropping up creating a digital flea market where people can post and sell their discount vouchers. While you always have the option of selling unwanted coupons on Craigslist or eBay, the new sites offer patrons refund guarantees if there's a hiccup with the transaction, and showcase the deals in a format similar to Groupon's.

"We've got tens of thousands of users," says Yael Gavish, cofounder of Lifesta, a San Francisco-based discount-voucher resale site that launched last summer. Like moss on trees, these secondary-market sites "are part of an ecosystem" of online discount dealing, she says.

Here's how it works. You were a little too ambitious when purchasing that Groupon for 6 a.m. Tae Bo classes, and now you're stuck with a $50 voucher you'll never redeem. You post the discount on Lifesta - or PonShoppe or CoupRecoup or a bevy of others - at whatever price you want, and someone else buys it. The transaction is instant; the voucher, which maintains the same expiration date, is active immediately. The buy-back sites get a small cut of the purchase price, you get some money back, and schlepping to the gym before sunrise is someone else's problem.

"We kind of let them undo some of their mistakes," says Gary Chiu, cofounder and CEO of PonShoppe, a discount resale site based in Chicago that launched in May.

Chung loves it - she was able to unload a pack of massage treatments that were weighing on her conscience, and avoid a bad case of buyer's remorse.

But what does this mean for the entrepreneurs offering the discounts? The small businesses that hook up with deal-a-day websites sometimes have to contend with the prospect of losing money - but it's a small price to pay for a large influx of new customers brought when a deal is activated. (A set number of people must buy each deal offered in order for the discount to become official. That means that if only 10 people sign up and the business has designated that it needs 15, the deal will be dropped.)

That careful balance between costs and benefits could be jeopardized by buy-back sites, says John Zhang, a professor of marketing at the University of Pennsylvania's Wharton School. The new sites challenge the deal-a-day model - and potentially discourage businesses from taking part - because they allow people who normally would be willing to pay full price to benefit without taking any risk.

"People who don't want to deal with the uncertainty of whether or not a Groupon will come through can now get them easier and faster, which destroys the purpose" for participating businesses, Zhang says. "If you look at the whole situation, you can make the prediction that in the future, there will be pressure from the merchants to eliminate the secondary market."

Groupon spokeswoman Julie Mossler says the emergence of the new sites doesn't threaten the company, which has facilitated deals for more than 55,000 businesses worldwide. "It doesn't erode our profits," she says. "But we can't stand behind any Groupons purchased on those sites because there are a million different ways that fraud can happen on those sites."

Some businesses have already taken steps - legitimate or not - to circumvent Groupon onslaughts. For example, earlier this summer, Chung walked to an established Brooklyn restaurant, voucher in hand, for a discounted dinner. The sign on the door said it was temporarily closed.

"I called them and the guy said 'The Groupon is putting me out of business,' but he was laughing. Then he said he was going to open up again in about a month, after the coupon expires," Chung says.

Had Groupon not refunded Chung for that voucher, she could have tried to resell it online. But that poses another problem: discount scalping.

Winnie Ng, a self-described recovering Groupon-aholic from Chicago, sometimes finds herself in a jam.

Ng recently bought a dance class package valued at $120 from Groupon for $60. It turns out her husband isn't sold on the idea, so Ng intends to resell the package on PonShoppe for more than she paid.

"I'd feel like I got ripped off if I was selling it for less than the value I bought it for," Ng said. "Plus, that person [who buys it] is still getting a deal."

When she realizes that a bunch of Groupons are about to expire, she tries a different tactic. She'll either trade them with her friends or, failing that, rush out after work to catch the deal in the final moments. "Life can be stressful in those weeks," she says.


Contact staff writer Gregory Thomas at 215-854-5289, gthomas@philly.com, or @GregRThomas on Twitter.

 

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