Groupon regret: How great deals make you spend more

June 7, 2011

Justine Rivero considers herself a bonafide personal-finance expert. She’s an adviser at the credit-tracking website Credit Karma, doling out tips on how to control spending, avoid crippling debt and keep your credit record pristine.

But even Justine Rivero is powerless against the lure of popular daily-deal site Groupon. When faced with a seemingly incredible bargain, she finds herself compelled to click that mouse again and again – against her own better judgment.

“I regretfully admit to totally blowing money on Groupons I never used,” says Rivero. “A dinner cruise for six people, a paintballing weekend, yoga classes. I swore it off for awhile, until something else popped up that I couldn’t resist. I should know better.”

Rivero isn’t alone in her hopeless addiction to the site. Think of it as a new strain of the virus that has long bedeviled shoppers at big-box retailers like Costco, Walmart or Target: The compulsion to buy a five-gallon jar of capers, or a gross of electric toothbrushes, because the deal is just too good to pass up. As a result, you end up spending far more than you would have otherwise.

“When we see that ticking clock stating there are only 45 minutes left until the offer expires, we lose our minds,” says Farnoosh Torabi, a personal-finance expert and author of the books Psych Yourself Rich and You’re So Money. “Our dopamine levels skyrocket, and we begin to imagine taking that balloon ride for 50 percent off or enjoying those buy-one-get-one-free smoothies. We end up making an impulse purchase — only to regret it soon after.”

And yet, we can’t seem to help ourselves. Maybe that’s why the recently-announced Groupon IPO appears to be such a hot property: The site already boasts 83 million subscribers in 43 countries, and has been noted as one of the fastest-growing companies in history.

That’s despite the fact that 20 percent of voucher deals end up going unused, according to industry estimates. That figure, just like wasted gift cards, amounts to pure profit for both the coupon site and the retailer — and indeed, allows them to offer the attractive deals in the first place.

Even the most die-hard users admit to having bought some turkeys. Kris Kendall, a marketing manager in Freemont, Calif., has been labeled a “Groupon pimp” by her buddies, since she buys several offers every week and is constantly emailing her friends about terrific deals. But the occasional missteps have cost her serious money.

“I bought five nights at a ski resort in Tahoe, but was only able to use four, so we lost $200 on the room we didn’t use,” says Kendall, who also shops at a host of similar sites like Living Social and Plum District. “I’ve also let a few expire because I just never had the mojo to go – namely, a pole-dancing workout class which I bought for a bunch of my friends, and then we never actually went.”

But take heart: You’re not totally defenseless against the seductive charms of daily-deal sites. Like any addict, though, you first have to admit you have a problem. Then you have to put yourself through a multiple-step program to rein in those impulses. A few tips:

Stay close to home
When it comes to coupon sites, “hyper-local” is the only way to go, says Torabi. The further away the retailer is, the less likely you’re actually going to make the long drive and cash in the voucher.

When in doubt, resell. No one is likely to have a perfect buying record, of diligently using every item you ever purchase. But with the emergence of reselling sites like Lifesta.com, you can at least hawk that gourmet-cupcake discount and get some of those expenses back.

Acknowledge your weaknesses
If you just can’t handle the temptation of all those juicy daily offers, take yourself off the email list and pretend the site doesn’t exist. After all, the best personal-finance strategy of all is to take a deep breath, step away from the keyboard, and buy nothing.

Don’t spend more to save more
If you’re offered 30 percent off a $100 item, it might sound like a terrific deal. But you’re not really “saving” $30; you’re actually spending $70. “It’s like getting a rewards credit card to score free miles,” says Justine Rivero, who admits to caving yet again recently, and snapping up some discounted improv-comedy tickets. “But we neglect to realize we’ll spend a ton on our cards just to score something free.”

3 comments

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Lifesta is definitely one of the ways to cure Groupon remorse. Its a great site with great deals!

Posted by JT200 | Report as abusive

But the whole US economy is built on consumers buying cheap, low quality, and useless goods. Wal-Mart, Starbucks, McDonalds, JC Penny, Dominoes, Mcmansions, etc…

Unless you want a deeper recession, spend on!

(Or you could start buying higher-quality goods made by people that actually care about what they’re selling)

Posted by Achille | Report as abusive

@JT200 & fellow addicts

When you go to Lifesta.com, aren’t you exposing yourselves to more temptation and addiction as a reselling site would definitely run deeper discounts than Groupon?

How about trying to quit smoking by doing weed?

Posted by doctorjay317 | Report as abusive

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