Updated: 9/23/2010 9:00 AM ET|
Big discounts on little pleasures
If you're struggling to afford essentials, steer clear. But if you want to stretch your dollars and enjoy some small luxuries, these deals are worth a look -- but be quick.
I've discovered another exception to the "If it seems too good to be true, it probably is" rule. The first was cash-back shopping. The new one? Social buying.
Social buying is an economical way to go out to dinner, have a facial, see an opera, get a massage, attend a sporting event, buy glasses or stretch vacation dollars. You can try a new business or, if you're lucky, snag a deep discount at a place you already know and love.
Of course, you shouldn't buy if you can't afford to spend right now. But social buying is a great way to save on things you've budgeted for, whether it's a haircut or a night out with friends.
BuyWithMe underwrites the social life of Jonathan Hines, a software engineer who lives just outside Boston. "When you have a (deal), the night goes on a lot longer," Hines says.
He considers social buying a no-brainer: "Why wouldn't you use it? The deals are there!"
How it works
Social-commerce sites promote their offers through social media and direct e-mails to members. (There's no cost to join.)
Usually the deals are local, but not always. For example, Jasmere contracts with specialty retailers that ship nationwide.
Most are offered for 24 hours, although some sites list for several days or a week. When enough people commit via credit card, the deal is on. You're e-mailed a voucher that you exchange for the product or service.
LivingSocial will give you the daily deal for free if you persuade three other people to buy it. This viral marketing lets a company reach many thousands of potential buyers in a very short time.
"Consumers get a great deal, and local businesses are getting people through the door," says LivingSocial CEO Tim O'Shaughnessy.
'Discover local gems'
The most common deals are for restaurants, salons and spas. Discounts to these places help encourage people who are nervous about spending to open up their wallets during an economic downturn. That was the idea behind SocialBuy, says co-founder Eli Natan.
"We're offering the things people want to do but maybe can't afford right now," he says.
Persuade a bar to offer $5 martinis and you'll pack the place, even on a Tuesday night, Natan says. SocialBuy has also drawn thousands of customers to hockey and basketball games, dessert shops, spas, restaurants -- even a fire-juggling class.
Social commerce abounds in nonessential but nifty experiences. A few examples I found: auto detailing, yoga classes, "flightseeing," indoor skydiving, city tours, fitness boot camps, rock climbing, trail rides, museum memberships and tattoos.
Groupon founder Andrew Mason sees social buying as way to help people "discover local gems."
"The idea is that you're exposing people to new (experiences)," Mason says.
Austin, Texas, newcomer Stephanie Hackney says Groupon has helped her and her husband get to know their new home. Among other things, they've enjoyed a Segway tour, a museum membership, a wine tasting, and minor-league hockey and baseball games.
"This is a much less expensive way of trying new places," says Hackney, who recently took a trapeze class with a $39 Groupon deal.
'Getting our brand out there'
How do the businesses make any money if they're discounting so deeply? Sometimes they don't. There are always going to be people who cherry-pick the best deals and never return.
What's just as likely is that people will discover a new favorite. Boston resident Angela Goff kept meaning to try a pizzeria near her apartment. But it took a BuyWithMe voucher to get her through the door.
"Now I go to it on a weekly basis," Goff says.
A Radisson Hotel in Boston's theater district recently ran a BuyWithMe promotion: $99 for a room, parking and breakfast for two. "We're not making money," hotel spokesman James Baker says. "But we're getting our brand out there -- we're getting customers who could be repeat customers."
Besides, those customers often spend more than the voucher's value. Martin Tobias, the CEO of Tippr, says merchants report that the discount translates into "a nicer bottle of wine (or) an extra appetizer."
That's not always the case, of course. I'm pretty good at keeping to the amount of the voucher and being courteously resistant to the "upsell."
Consumers 'get the buying power'
Worried about overbuying or simply nervous about committing? Maybe you should be. John D. Breyault of the National Consumers League notes that short-term deals create a sense of urgency that may tempt those on tight budgets.
"Don't splurge just because something is a good deal," Breyault says.
One tactic would be to join sites with three- to seven-day windows. Andrew Moss, the CEO of BuyWithMe, opted for weeklong deals because they allow people "to coordinate, plan and make good purchases."
Cutting out buyer's remorse is only part of the equation. Many of the offers at BuyWithMe appeal to groups, and group organizing is different than deciding to take your girlfriend out for a $5 martini.
"A handful of (our deals) you know you want right away," Moss says, "but you might want to talk to a few people if you're buying circus tickets."
Just ask Nuzhat Karim, who bought a couple of $15 tickets (normally $35) when the Big Apple Circus came through Boston. Friends and family members clamored to get in on the deal, and she wound up purchasing 21 more tickets.
Social buying allows Karim and her husband to try new restaurants without breaking the bank. "It's win-win: They get the customers, and we get the buying power," Karim says.
There's no question that social buying can prop up a budget. Through Groupon, Dallas resident Shellye Schormleitz paid $49 for a one-hour photo shoot for her daughter's senior pictures. Schormleitz bought an on-site car wash and detailing for $35 and gave it to her boyfriend on Valentine's Day.
"I'm a single mom with three teenagers, so I'm always trying to stretch dollars," she says. "Groupon gives me an opportunity to try new merchants and new things at a pretty reasonable cost, and to fill in the gaps when I need a gift."
The rules of the game
Play your cards right and you can bank half a dozen deeply discounted haircuts, massages or restaurant meals, either for your own use or to give as gifts.
Don't get carried away, though. Suppose you're allowed to get six vouchers for a hot new restaurant or swell salon. What if you don't get around to using them all before their expiration dates?
Or suppose the restaurant or salon closes? Breyault says you could contact your credit card company to ask for a refund, but it's still going to be a pain.
Be sure to read an offer's details carefully before buying. Breyault tells of a woman who bought a $150 salon voucher without understanding that it had to be used all in one appointment.
It wouldn't hurt to call the place of business before committing to a deal, Breyault says. For example, a small spa might have only one masseuse on staff, which means appointments are relatively limited. Or maybe the chiropractor doesn't work Saturdays and a weekday appointment is tough for you to manage.
Here are a few other tips from the pros:
- Be sure it's a good fit. Make sure you really want this deal -- and that the same service isn't available elsewhere for less. Fifty percent off a high-end salon's haircut price might still be more than you'd pay at a less tony cuttery.
- Bring your friends. Some sites offer incentives for referrals.
- Make vacations cheaper. If you know for sure that you'll be traveling, sign up for social-buy sites in those cities. You could save a ton on meals, hotels and attractions.
- Don't buy a voucher that's hard to use. For example, you might put off going to a restaurant that's two bus rides away.
- Save on gifts. If everyone throws in a few bucks, you could get a massage for the office manager. Your favorite Little Leaguer might be thrilled with an hour in a batting cage that cost you only $12.50.
- Date cheaply. If your companion is also a "frugalist," he or she might be tickled by the idea of paying $10 for $25 worth of pizza or barbecue.
- Don't stiff your server. If your $50 dinner set you back on only $25, please tip on the amount it ordinarily would have cost. After all, it's the owners -- not the foot soldiers -- who decide to advertise through social buying.
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