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Social Buying & Digital Deals

The Internet booms again – on shopping. “Groupon.” “Living Social.” We look at how and why the Web is changing the way we buy now.

Online discount sites: Groupon; Wow; LivingSocial.

E-commerce – online shopping – is cooking this year. Up and up, as Americans scramble onto the Internet for deals and convenience and holiday gifts.

But the biggest thing of all this year is a whole breed of super bargain hunting and consumer leverage online. Gangs, hordes, wolf packs of consumers banding together to leverage great deals from local retailers. It’s a boiling phenom.

The biggest outfit doing it is called Groupon. The company is two years old and last week turned down a $6 billion dollar buyout offer from Google. And there are others. We click through.

-Tom Ashbrook

Guests:

Natali Morris, news anchor for CNET TV and technology contributor for CBS News.

Chris Steiner, staff writer for Forbes Magazine, where he covers the Internet and financial technology. He wrote the August cover story on Groupon for Forbes.

Tim O’Shaugnessy, CEO and founder of LivingSocial. His company is the 2nd biggest website for daily deals behind Groupon and has major expansion plans.

Scott Steinberg, CEO and founder of Tech Savvy Global. He’s a tech entrepeneur and analyst.

Please follow our community rules when engaging in comment discussion on this site.
  • Nick from Massachusetts

    I think sales on the Internet are wonderful. Your store front is no longer on Main Street but the whole world.

    But, I do miss the individual shop where you form a relationship of trust with the owner and camaraderie with the other shoppers. I do miss Main Street.

  • Ellen Dibble, Northampton, MA

    Think of the advantage to the environment. Instead of a thousand cars driving into town, you have one UPS guy or FedEx guy doing one grand round route. What this means to me (going car-free, by the way, for 15 years) is that a trip to town is MOSTLY social, plus I pick up anything that is actually still available locally (very locally). Plenty of stores have been supplanted by art galleries, professional services buildings, restaurants. We have two very low-cost stores that have remaindered overstocks, something like that, which need to be visited and thoroughly scanned frequently. Where I go past if not in each week, I found the best jeans ITWW (in the whole wide world, for $10) one summer, and always the best artwork cards and calendars, classic and emergent. Also always mittens, batteries, lots of basics, for a few bucks.

  • Martin Voelker

    Among the biggest deals is CRAIGSLIST. Now it’s become possible to easily get rid of used stuff or buy face to face. It’s online but it’s also local. I truly enjoy how I get to drive (or bike) to neighborhoods I never knew existed when picking up goods.

  • Ellen Dibble, Northampton, MA

    I don’t know what you’re buying local via craigslist, but from personal experience I would say aren’t you afraid those small-time thieves who are striking where windows can be sliced around 4:00 in the morning, aren’t you afraid they’ll come sell you something, maybe something “hot,” and in the process scope out the lay of your residence? If you go to them, I guess you have another issue. Entrapment. (I transcribe millions of court pages, so.)

  • Jeremy

    Seems like another way to destroy the downtown. Your speaker seemed to sugest that all a physical store will be good for is price comparison. Please ask your guest if she thinks it is possible to keep this many people in retail employed. retail is one of the few employers left where someone without a college degree can get a job. I don’t see the “store” compeating.

  • frances

    Tom, you’re right that Groupon isn’t for bread and milk, but I did get to go to the dentist for the first time in several years (I’ve never had coverage as an adult) when they offered a cleaning and consultation for $35. Definitely a necessity that I saved money on.

    Boston, MA

  • Ellen Dibble, Northampton, MA

    I would hope my local bargain stores are participating in Groupon. From the prices they can offer, it seems they do. But it’s not services they offer. It’s merchandise that needs walls and salespeople, mostly local college students.

  • http://cotswoldfurniture.com Laura Lomas

    My husband is a furniture maker. We own 2 galleries.. one in Stowe, VT and one in Gt. Barrington, MA. (Cotswold Furniture). The website is not a sales tool for us. It is a fantastic connecting and advertsing tool, but people need to come to see us and experience our furniture before they buy. We may sell one of our rugs or lighting etc online… but very, very rarely furniture. We then get repeat clients, but they call us directly because we have created a relationship with them.

  • TimV

    I have been signed up for Groupon for a month or so. So far I have not used any of the coupons – most of the stuff is not of interest, but i like the idea for the most part.

  • Ellen Dibble, Northampton, MA

    I was hoping to hear Groupon works in the other direction: that 10,000 people need dental care in Western Mass that is affordable. And then Groupon can find providers who need clients.

  • Janet in Brentwood TN

    Have been using Groupon for a year. I use my groupon at stores and restaurants where I would not otherwise feel motivated to go, and have gone back to all of them for full price purchases. It is important merchants treat groupon users well, because some do seem like they begrudge the groupon.

  • yar

    I have a different idea. What about website that allows you to purchase services in trade. Get rid of money altogether. Trade time, isn’t that what money is all about. I need my dishwasher fixed, Joe the plumber needs a back adjustment, Jill the massage therapist needs a will made, and Jim the lawyer need his computer fixed. I fix the computer, and get my dishwasher fixed at the same time, all by trading time. Sounds like a winner to me. No money needs to change hands, we just need a website to handle the accounting.
    I bet the company that builds it will we worth billions, no not billions of dollars, billions of hours.
    Watch out Google.

  • Ellen Dibble, Northampton, MA

    Let’s say that “be a local hero, buy locally” is part of my mantra for living, partly for the local tax base, partly because I need to keep friendly faces in my purview and because I don’t want to heat the planet with gas usage. So say these local businesses offer specials on groupon. So I walk into Glimpse of Tibet, where you can get handmade awesome artwork for $10, $20, up to about $300. And the clerk divulges that today is busy because of a groupon deal. People from all over Western Mass are getting 50% off.
    Bully for them. But I’m not then going to go to their towns to patronize their merchants.

  • Chris

    One thing that seems to be missing in the discussion is that even though not everyone will go back to a particular business without a discount, that doesn’t mean they won’t provide positive word-of-mouth for the business, if they had a positive experience. I’ve used Groupons for some local places myself that I wanted to try, and otherwise would not have been able to afford, and made it a point to tell others about the quality of what was offered.

  • Rachel

    Love Groupon and Living Social! I’m signed up for a couple other companies that do the same thing as well. It’s great to be introduced to new restaurants and services via these specials that I would have never known about otherwise.

    As for the person who wrote about thieves on craigslist – I’ve bought and sold many things via craigslist. Yeah – there are some nuts out there, but you just have to be careful. Otherwise I have gotten great deals including my two barely used Italian sofas that were only $150. The only person who was the thief in that transaction was me because they were a steal at that price.

    Also – as pointed out by another person – this is better for the environment – people shopping via the internet instead of endlessly driving around. Yes there are still a lot of people driving around, but the younger generations will probably use the internet more. Sorry for the retail job losses, but everything changes eventually.

  • Mac Harris

    This is just coupons on steroids and coupons have done nothing but increase costs. Print coupons, collect coupons, clearing house the coupons. In this case, groupon just keeps their overhead low as the clearing house.

    Net outcome? Everyone increases there retail price so they can afford to discount it. Blue smoke and mirrors.

  • Ellen Dibble, Northampton, MA

    yar, does groupon in your trade-a-thon vision charge the taxes for all this trading? Or does the national deficit just skyrocket.

  • Mac Harris

    Sorry, forgot to say West Union, IA

  • John from Boston

    How will these sites deal with stores that raise their “retail” price by 50% and then offer a 50% off coupon?

  • Kevin

    As a self-proclaimed “savvy consumer”, I have signed up to Groupon. I simply wait until the daily offer is something I’ve been waiting to buy. No impulse buying involved in that…

    Kevin

  • Sam Wilson

    Online Retailers like Amazon.com are good for the goods like electronics or even flowers.. however to buy stuff like clothes, shoes, furniture, cars etc.. (the list is long) unless there is a real way to “feel” about the goods, its not worth buying from the online retailers.

    Sam Wilson,
    Boston, MA

  • Naga Donti

    Being a small business owner – I would counter this GroupOn “hostage” situation, by offering directly the matching deals with out having to pay 25% to GroupOn. I would even take on BannerAds to that effect on their site or similar sites saying – We would match 50% off deals. At least, that way I would net 50% versus 25% as a business owner. In other words – cut the middle-ma out namely here GroupOn etc.

    Thanks for the opportunity to comment.

  • Coral

    we often buy groupons to restaurants we haven’t tried before. we have a couple drinks with the meal and usually spend about twice the value of the groupon, which seems like it would be a pretty good deal for the restaurant. unfortunately i know my husband and i are not the typical customers but we always tip on the full bill, usually generously, although we have been treated with that slightly snarky attitude when we mention the groupon…

  • Ellen Dibble, Northampton, MA

    Rachel, it seems to me Groupon is foisting more driving around to distant businesses upon us. You think that like craigslist it is going to encourage ordering things on line? Hmm. So it would urge you to a WEBSITE, versus bricks-and-mortars. That would be pretty good in terms of global warming, and in terms of saving time driving here and there to check things out.

  • Stephanie Schlabaugh

    I work in a local resteraunt here in Kalona, Iowa. People come in with coupons that they can purchase online (not groupon) all the time. One reason as a server why I don’t mind it is because it says right on the coupon an 18% gratuity is added automatically. That definitely makes my disposition better. -Steph

  • Lou

    I am a bar manager at a high end restaurant in Nashville. Our management team has decided to NOT participate in Groupon. We don’t need it. We make a great product and provide a great experience.

    From a personal standpoint: it used to be that you bought a good or service for a fair price and made a fair profit. Buyers (whether they can afford it or not) don’t care about a fair profit…and this by definition a hyper-local service. So much for supporting your local business. It is greed on the consumer’s part and fear on the retailer’s part.

  • Ellen Dibble, Northampton, MA

    One local business (a retail store with eclectic international stylish goods) became very successful by having a web presence (web page), and they sell internationally out of their little one-room shop.
    Paired with this development, in my building there is a guy who creates web pages for such businesses, and he creates those for businesses internationally, and does very well.

  • Bob Letcher from Columbus, Ohio

    Oh, great! More consumption… at a time when production accelerates climate change. No worry, though: the Republicans and T-Party people are running the insane asylum (and making sure that already well to-do people can afford to eat at gourmet restaurants while so many people are apparently left to “eat cake”.

  • Noreen

    Wanted to let merchants know of a great idea to generate repeat business that my the local spa/massage place did for it’s Groupon customers. They simply offered $10 off for return Groupon customers. I did go back even for the lower discount and then the merchant gets closer to the full price of the service without splitting it w/Groupon. Some other special offer (that doesn’t break the bank) for Groupon customers is a great way to get people to come back!

  • http://www.jnedreskyphoto.com/ James Nedresky

    One big trouble with giving huge price reductions to gain promotional advertising is that it reinforces the customer in seeing only the price of the product or service, and no longer what value is contained in the original price. This has quite an effect on long term consumer perceptions of product or service worth. Look at the $8000 government tax credit for purchasing a house during a given amount of time. It did nothing to promote home sales after it expired since consumers figured any home should be reduced by about that much. The actual value contained in the product is now seen as less. Giving these kind of groupon discounts will eventually only bring in customers that ONLY want to see a product or service in terms of price, not value. Do you want to create that kind of customer?

  • Don Manley

    I’m partners in a marketing firm for The Balsams Grand Resort Hotel in NH.

    We do not participate in Tracelocity and other discount booking programs because it is not a good deal for the resort. Large discount firms are driving down profits and increasingly dictate prices retailers can charge. It’s the Wal-Martization of America. We find that folks looking for a discount are not typically return customers. Once again the big firms take all the profits.

  • Ellen Dibble, Northampton, MA

    Sam, I buy from online retailers for most of what you say you avoid, furniture, clothes — not available near me. But I use a combination of catalogues and online surfing to identify what I need. Also I won’t put a credit card number online, so they have to have a way to call in a credit card number. Also, I won’t order if I call and the business seems to be using employees out of the United States. I complain right to the management. It is possible to create a relationship with the business, get to know their strengths. And the chance of buying on impulse is much less if you have the possibility of having to mail it back, plus if you can do comparison “shopping” for weeks or even months. Female that I am, I fall asleep wondering how this drape or that pillow will enhance my milieu, with little stickies marking my favorite choices. Mostly the process of selection (“window” shopping) is satisfying in itself.

  • http://NA Edward R. Kweskin

    No need for speculation. As Walt Kelly”s Pogo said, “We have met the enemy and they are us”. The world of internet commerce, deep discounts, and everything made by exploited labor is our reality.

    There are no more jobs, no personal income growth. no social responsibility, no education. Groupon et al: The Death Stars have launched.

    It isn’t a speculated future, it is now.

    While we are somewhat concerned in Southern California about all this, we still have all this sunshine and get tan. Vitamin D happiness mitigation.

    EK
    San Clemente, CA

  • Ellen Dibble, Northampton, MA

    Very dire, Edward K. If you start with the conundrum that efficiencies in production/services lead to fewer jobs (fewer people can achieve the same amount of work), plus the amount of product used/acquired is a deficit to our well-being in terms of trash accruing and CO2 doing its harm, then we need fewer services (fewer jobs) and fewer purchases in general.
    We need to be mean and lean. We need to be smart about what is needed versus what is not. (The internet is a HUGE assist in that.) The lean and mean approach might generate fewer taxes, but then again, there are paradoxes on all sides.

  • Kevin

    Concerning: “**PLEASE, let us know where you’re from”

    I would like to offer to WBUR’s OnPoint a 100% discount on adding an optional “Location” field to your WordPress comment form.

    (I’ll volunteer the web work to add this, so that people will tend to report it.)

    Kevin

  • Zeno

    I purchased a repair part online a few weeks ago, and they not only charged me for shipping (OK), but they charged me $10 in sales tax (Not OK). I know that tax is not going to any state, but just into the retailers pocket. Unfortunately they knew they were the only ones who could supply the part so I had to eat the tax.

    I love online shopping, and it is unfortunate that the local retailers have to compete with the lack of sales tax (usually), but when the local store is charging 50% more, you have to wonder what is really going on there.

  • http://www.quivivity.com Barb Finer

    I subscribed to Groupon, Living Social and Yelp Deals and know of WowWhatSavings (Boston company). I have purchased several Groupons. Groupon’s value, IMHO, is to be a promotional platform for LOCAL, SMALL businesses including restaurants, entertainment and service providers who do not have reasonable other methods (or the money) to get the word out.

    Most of the Groupons I have purchased got me to try a new product/serive or to choose the one I bought when other options were available: great way to try something with lower risk.

    Google wants access to local/small-biz dollars and customers (as do many businesses: market is fragmented and hard to reach).

  • Mark

    Ordering online also means that usually they will be using air freight, which is environmentally the most destructive way to transport goods. If you combine several trips into one, you’ll get the same fuel savings as that FedEx truck.

    BTW, groupon.com is unusable. It insists on registration. It’s all about spying on consumers, and like studies of loyalty cards in grocery stores have shown, spying on consumers means higher prices.

  • Mark

    @frances: I can’t afford to go to the dentist right now either. I go to a local dental school.

    The pluses: half-price, the quality is just as good as a regular dentist.

    The minus: They take a lot longer.

    The bottom line: Only good if you’re retired or self-employed.

    In Boston, there’s Tufts (big) and Harvard (small) and BU (but only if you’re on welfare).

  • Mark

    Sorry, I meant “unemployed” not “self-employed.”

  • David

    Tom,

    Listening to the retailers on your show I’ve noticed a
    misunderstanding by these business owners and even the supporters of Groupon of what advertising actually does. Advertising DOES NOT generate sales, advertising generates LEADS. The best way storefront retailers can use services like Groupon, YP.com or whatever, is to invest in training their employees to close the deal and not just stand around collecting coupons and processing discounts. This is a simple shift in thinking that will maximize advertising dollars.

  • Todd

    What we need to recognize here, is where the consumer is left in all of this. Sure, satisfied that they have just received a great deal or purchased something they might otherwise have not, but that’s it. I am reminded of a callers comments today (I think her name is Heidi) regarding the teeth whitening she purchased for her husband. She stated that her husband became somewhat of a social spokesperson for the service. But other than white teeth and maybe the satisfaction of helping a friend get white teeth, What did HE get in return… nothing. There is only one company out there that is addressing that issue. Pure Verticals, Inc. Pure Vertical’s is going to turn social commerce on it’s ear with their flagship offering appropriately named,CommerceSocial, by allowing merchants and brands unlimited viral storefronts that can be easily posted on any social property, AND by rewarding consumers who share and endorse products in their own social content. Imagine a social atmosphere where rather than discount their service and pay Groupon 25%, merchants now pay us 25% to become their social sales force. Brands have been trying to measure the value of their network for years. CommerceSocial does just that.

  • http://www.beccar.wordpress.com Eugenia Renskoff, Brooklyn, NY

    Hi, Tom, I wish I could shop like I used to. Your show last night made me go back in memory to the good all days when I shopped wherever I wanted with no credit card debt. Since my mortgage fraud (not my fault) predatory lending and foreclosure in Atlanta, GA, i only shop The Salvation Army and similar stores because that is all that I can afford. When I have money again, I want to buy the stuff that I bought before. All new stuff, nothing used or worn by others. Eugenia Renskoff

  • http://www.localherocoupons.com James

    Groupon and Living Social have a place in a business plan but I believe it is currently limited. It is fantastic for first time businesses to get people aware of their location and products or services but it is a loss leader. Long term it is not sustainable and I think there will be some backlash because the participating business looses money on the program. Coupons are useful and businesses should consider their use. “Full price” is nice but a business can generate a higher volume of profitable revenue per month using coupons the right way – which is to incent buyers to buy more often than they normally would. If your per customer sales volume increases the coupon is definitely a smart promotion. I disagree with the Living Social CEO and I don’t think he is honest about the actual payback being higher than 25% of the dollar. There is a lot of bad and misguided marketing out there but it is due to sellers of advertising not being aware of the financial dynamics of the companies they represent and recommending advertising that is difficult to track performance of and not focused on buyer behaviors. When he talks about “breakage” what will the backlash be of the consumers when they start to feel remorse and less inclined to participate in the email blasts?

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