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'Daily deals' sites turn discounts into a social media phenomenon

A new breed of coupons offers eye-popping savings at local stores and activities, but the chance to buy each one usually lasts 24 hours or less.

October 26, 2010|By Andrea Chang, Los Angeles Times

As shoppers get ready for another tough holiday season, more will be using coupons — but not your mother's old-school, cut-on-the-dotted-line version.

A new breed of coupons — zapped daily to consumers' e-mail accounts and offering local deals for spa treatments, restaurants, yoga classes, hot-air balloon rides, stores and even Botox — has transformed the dowdy discounts into a social media phenomenon that's attracting a new generation of fans.

The savings are eye-popping: 50% to 90% off is typical. But there's a catch. If you want that $40 mani-pedi for 15 bucks, you'll have to pay upfront with a credit card and you'll have to move fast. The chance to snag one of these vouchers usually lasts no more than 24 hours (though merchants will honor them for weeks or months).

Bargain-hungry shoppers are hooked. "Daily deals" websites including Groupon, LivingSocial and Screamin Daily Deals have attracted millions of users, a lot of them young, urban and tech-savvy. Many say they love the excitement of waking up in the morning, checking the latest deal online and deliberating with friends on Facebook or Twitter about whether to buy — all while the clock ticks down.

"It's totally addictive," said Yi Zhang, a 24-year-old from West Los Angeles who has spent more than $1,000 on dozens of daily deals in the last year. "Sometimes I press refresh at midnight if I'm awake."

Retail watchers say the websites have given the retail industry a much-needed lift. Local merchants get an immediate injection of cash, and pure profit if customers pay for the coupons but never use them. More important is exposure: Groupon, for instance, has more than half a million subscribers in the L.A. market alone.

There are risks. Some business owners have lost money on the promotions or have been unable to convert deal seekers into permanent customers. Others have capped the number of vouchers they'll honor on a given day, angering buyers.

Still, the deals are proving popular with both merchants and consumers. A recent Groupon offer — $50 for a 50-minute massage or facial with aromatherapy, half the usual $100 price — netted 1,618 purchases for Dtox Day Spa, which has locations in Los Feliz and Encino.

"Ninety percent of the people we're getting are new clientele," co-owner Cary Mock said. "It helps to put us on the map."

The trend is quickly spreading beyond local merchants.

Nonprofits such as the Huntington Library, Art Collections and Botanical Gardens in San Marino have attracted thousands of new patrons using daily deals. Major retail chains are jumping in too: Apparel giant Gap recently sold $50 gift certificates for $25 on Groupon — shoppers nationwide snapped up 445,000 of them in just 24 hours. Monday's Groupon was a $20 deal for $40 worth of merchandise at the Body Shop.

And now companies including newspapers and consumer reviews website Yelp are rolling out their own programs. The Times' parent company, Tribune Co., recently signed a deal with Groupon to start a daily deals website, called Liquid Coupon, powered by Groupon's software and customer support.

The daily deals phenomenon "is a rocket ship unlike anything we've probably seen in consumer shopping online," said Brad Wilson, a discounts expert and founder of BradsDeals.com. "It's brilliant."

The websites generally follow a similar format: A daily deals company partners with a local business, which offers one of its products or services at a deep discount. Consumers can buy the deal for themselves or as a gift for someone else.

After a deal is bought, consumers print out their e-mailed vouchers and present them to the merchant when they want to redeem; some companies allow buyers to show the purchase on their smart phones. Merchants are responsible for tracking which coupons are redeemed to prevent duplication.

With Americans expected to shop frugally for the holidays this year, deal sites are planning big promotions. LivingSocial will launch 12 Days of Gifting, a program that will offer 12 consecutive days of "inherently giftable" deals such as fine dining and wine-making, Chief Executive Tim O'Shaughnessy said.

The company — which entered the Los Angeles market this year and currently has 10 million subscribers in the U.S., Canada, Britain and Ireland — said it has saved consumers more than $100 million this year.

Groupon, too, will put a "huge emphasis on gifting" this holiday season, President Rob Solomon said. The company began two years ago in Chicago and has since racked up 25 million subscribers in 31 countries.

"We're really going to go for it and really blow it out," Solomon said.

Instead of hitting the mall, daily deals devotee Marian Bacol-Uba, 25, said she would be scouring coupon sites for her family's Christmas gifts.

"I'd rather give them a deal for a restaurant that I know they'd try instead of a shirt I know they'd never wear," said Bacol-Uba, a food blogger and marketing manager from Irvine.

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