Social Buying Sites: Altering the Holiday Shopping Dynamic

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Social media has touched almost every corner of the Internet, including commerce. Using social buying websites like Groupon.com, consumers who don’t know each other can band together anonymously to qualify for hefty group discounts on costly purchases.

You usually won’t see discounts on basic necessities, but for the little extras in life – things like wine tastings, restaurants, spa services or theme park admissions – substantial savings are the norm.

Should you try them out this holiday season?

The Concept

Many businesses offer discounts for buying in bulk. Stores like Costco and BJ’s operate on this business model, and countless other companies are willing to lower prices for large orders. The problem is that this is often useless to individual consumers. You may know the local winery or pizza shop will slash the price if fifty people order with you, but can you really find 50 people to have dinner with you?

Sites like Groupon let total strangers pool together anonymously over the Internet to qualify for group discounts at their favorite local businesses. Once signed up, you can also rally people you do know to participate. When a certain number of people have signed up or agreed to buy, the business offers the deal.

Gregg Pupecki, sales and marketing director of Wendella Boats & Chicago Water Taxi, told USA Today that “Groupon is one of the best sales and marketing tools to come out since the Internet,” after selling over 5,000 discount tickets on its first promotion – and 20,000 on the second.

How Big Are The Discounts?

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Participating in a social buying website might seem like a lot of work if we were talking about $1 or $2 savings. But in most cases, the discounts made available by these communities are substantial – 50% or more in some instances. LivingSocial.com as another example. Tracey Wilson, the chief executive officer of Red Velvet Cupcakery, offered $50 gift cards for $25 to users of LivingSocial three times per year. And the users responded: these three promotions alone dr0ve “about as much as a week’s gross sales of $20,000 to $30,000,” she told USA Today.

Drawbacks

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Of course, not everyone has an equal shot at reaping the rewards of social buying. Keep in mind that the types of businesses that participate are usually local retailers. If you live in a sparsely populated area, it might be tough to find Groupon or LiveSocial-type deals unless you want to drive 50-100 miles for your discount, at which point the entire exercise could become pointless.

Then there’s the chance of finding a deal you would love near you, but not getting it because too few people signed up. Other times, deals will go live, but because they’re so popular, you may find it challenging to redeem the coupon for which you already paid.

You can also find yourself feeling rushed to act immediately, or else lose out on the deal. And of course, whether a deal is really a deal is always a matter of opinion. To some of us, a $200 spa treatment reduced to $85 will still seem pricey; to others, it will be a steal.

Holiday Shopping

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The idea of using social sites to save on and simplify holiday shopping is not new. In fact, many consumers are already counting on it as part of their shopping strategy. Meredith Barnhill, an avid Christmas shopper who got creative in her attempts to spend less while still giving lots, recently told CNN that in addition to creating a gift shopping list, she is “relying on coupons and deals” from Groupon and LivingSocial.

With customers rushing to use 50%-90% off group discounts on their holiday shopping, group buying websites may even alter the holiday shopping experience for good.

Clearly, this is a trend many consumers have embraced. If you are looking for a creative way to trim holiday shopping costs, social buying sites are worth considering.