Group Over-Buying: When the 'Deal of the Day' Is No Deal at All
Sara Jones doesn't remember what her first Groupon purchase was, but a year later, she has spent $3,000 on massages, facials, restaurants, hotel rooms, clothing, outdoor activities and food, not only on Groupon, but on other group discount sites like LivingSocial, Plum District, HomeRun, Trubate and Gilt Groupe. "I didn't even redeem them all. A few expired or I was able to get a refund from Groupon. Some I gave as gifts during the holidays or birthdays," says Jones. "I got caught up in the thrill due to the tremendous savings," she adds with remorse. "I found myself buying things just because the deals were so good."
Read more about the pitfalls of group deals sites on DailyFinance.com She has tried to recoup some of that money on sites like Lifesta, which let people sell secondhand deals. "I have posted about 10 of my deals on Lifesta, and have sold about half," she says. Saving on 'Needs' or Spending on 'Wants'? Oh, what the Internet hath wrought. A seemingly good thing -- the opportunity to save on purchases -- can now lead to a huge waste of money. A recent ConsumerSearch.com survey showed that among people who purchased at least one deal in the past year, 68% had purchased three or more deals, and 30% had purchased six or more. According to a survey conducted for the American Institute of Certified Public Accountants by Harris Interactive, in the past year, 23 million Americans -- 10% of the adult population -- purchased a coupon from a website such as Groupon or LivingSocial. It was a nearly even split: About half of the coupons were for items the buyers said they "needed" while the other half were for items they just "wanted." Men were marginally more likely to buy a coupon for a want as opposed to a need, while women displayed the reverse tendency. "We all love a great deal, and we encourage consumers to pursue any opportunity to save on items they need," noted Jordan Amin, chairman of the National CPA Financial Literacy Commission in a prepared statement. "A purchase though, is always an exercise in prioritization. Spending on too many wants, no matter how great the perceived value, is a lost opportunity for retirement and other savings." "In the growing deal culture, it's important that consumers take a step back," he adds. "Think through needs, the actual value of the deals and the financial trade-offs that come with spending money instead of saving it. Money doesn't come easily. We want to make sure it doesn't go easily, either." Buying What's Already On Your List And, yes, the money can go easily. Jessica Meadows purchases an average of three deals a month, spending at least $150 on massages, facials, and big fun -- hot air balloon rides, helicopter lessons, a NASCAR driving experience and the like. "I went skydiving for $150 when it normally costs $235," she says. She routinely scores 50% to 70% off the regular price on her splurges. The only buyer's remorse she has had came when she purchased deals that offered a good discount, but still led her to spend more than she typically would have. "I bought a Donna Karan dress through Nomrerack for $59, regularly $350," says Meadows. "Good deal, but I wouldn't normally buy a dress for more than $30 from a store like TJMaxx or even on sale at a department store." Mostly, though, she says she buys discount buying deals for items she was either planning to purchase anyway, or specific adventure type deals that already appealed to her. "They were on my list of things to do before I die," she adds. "I don't feel like I go overboard because I manage my deals through organization," says Meadows. "I get what I want and am pleased with the outcome. Yes, I spend money, but it's money I was going to spend anyway, just less, then I don't see that as problem." Of course, it's not just women who are social buying fans. Dan Guarino was sold on the phenomenon when he scored his first Groupon deal last summer and got a teeth-whitening treatment for $79. "I saved $371 -- amazing!" says Guarino, who has been on the hunt for deals ever since. He has purchased lots of restaurant and spa deals, and just redeemed a coupon for a massage. He too, isn't sure exactly how much he has spent on group buying deals, but estimates it's "well over $1,000" in less than a year. But like so many other group buyers, he says he, too, has forgotten to redeem coupons, among them a half-off Gap deal and a discount at Bonchon Chicken. "I get pretty annoyed when I forget," Guarino says. He admits he has purchased items he doesn't need. "But I love the deal, and I love sharing the deals with my friends. I'll post deals on Facebook or text them to my friends so they can take advantage of them too."How to Tame the Group Buying HabitFinancial gurus are all for taking advantage of a real deal. But knowing when to say no, and when enough is enough, is key. Kit Yarrow, author and expert consumer psychologist offers her thoughts. "Ask yourself if you would have sought the product or service if it hadn't come in your mailbox. Add up the cost of all the Groupons your purchased and didn't use. Ask yourself if the restaurant or experience would have been more fun if it was exactly where you wanted to go, instead of the place for which had a Groupon that day." Mackey McNeill, a certified public accountant and financial planner goes further. "Set a weekly or monthly budget for deals based on your overall spending and income that you can afford to spend from each paycheck on deals. Write it down. Commit to it with your partner."Get a friend or buddy to assist you, like AA where you have someone to call when you need help, she suggests. Her other recommendations: " Commit to a pause. Deals are impulsive, emotional buying decisions and in order to interrupt them you need a pause -- like agreeing to check in with a spouse or a friend or getting up from the computer for 10 minutes before making the purchases, advises McNeill. " Ask yourself if in 30 days you will be happy that I made this purchase? " Turn off your Groupon alert/message once you've spent your budget for the week or month. " Replace one habit with another habit. "If Groupon was a bad habit, give yourself another avenue. If you love deals, allocate $15 a week for a trip to Goodwill or second hand store." Better still, replace your spending habit with a healthy habit. "Walk in the park or go the library with the time you used to spend on Groupon. [If you] interrupt your pattern for four to six weeks, you can unhook," she explains. "The replacement activity/habit is to keep you from feeling deprived."
More from DailyFinance:
- Bank of America's New Credit Card Penalty Interest Rate Is Nearly 30%
- What Deals on Facebook Means to the Group-Buying Coupon Business
- 529s in 2011: What's Happening Now in College Savings Plans
- Group Over-Buying: When the 'Deal of the Day' Is No Deal at All
- Refrigerator Redux: How to Put Your Electric Bill on Ice