Beware of online group buying deal sites

Whopping price slashes could actually end up costing you more.

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by Josephine.Lim
August 24th, 2011

Online only.

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For a self-deemed shopaholic like Eric Yip, daily deal websites are akin to putting a plate full of bacon in front of someone trying to lose weight. It makes saving money a heck of a lot harder.

As we try to become savvier shoppers, it’s tough to resist the seductive price cuts on fare at new restaurants, an afternoon of splattering your buddies in a paintball game or winding down with a manicure and pedicure. Given the opportunity to do fun things for less, it’s hard to say no.

Thanks to daily email reminders from these sites, the 22-year-old finds himself doling out about $200 a month on electronics and clothes. It’s the easy access to deals that are burning a hole through his wallet, he says.

“People tend to have bad habits because it’s convenient,” Yip says.

Yip isn’t alone when he finds himself dropping more bills on daily deal websites than he planned. In a survey conducted by Vision Critical in May, 73% of Canadians who use group buying sites said they were encouraged to purchase unplanned products and services.

And it’s not like they were saving on gifts for a friend, family member or co-worker, either. Eighty-one per cent of respondents said those deals were all for themselves. The top things to splurge on were cheap eats (58%), recreational activities (22%) and fitness deals (15%).

If it’s any comfort for those falling for the site’s wily ways, the website’s model is set up to get people to spend more.

It’s the group mentality that’s making people want to buy, says June Cotte, associate marketing professor at the University of Western. “If lots of people are buying it and lots of people are interested in it then it must mean it’s good,” she says. “The group is used as a source of information and so in addition to the ads from the company and other kinds of word of mouth, this sends a very strong signal that something is valued by a group.”

And the ticking countdown placed right beside your purchase triggers a response that you need to buy now before time runs out.

Cotte adds that the focus on credit (and lack of a cash payment option) make such sites dangerous for those with poor personal finance habits.

“The farther you remove the purchase from any kind of sense of loss, the easier it is to consume and purchase,” Cotte says. “You click on a button, it comes from a credit card, it’s a bit easier to (spend).”

So the next time you’re tempted to jump on that great deal, you’d do well to ask yourself a simple question:  Do I really need to buy that?

2 comments on “Beware of online group buying deal sites

  1. Such sites are also becoming popular in Europe now. Thanks for the detailed insights, I now know better what their aim is and how to spot them.

    Reply

  2. I'd say, it's best to search on different group buying sites first before making a purchase, for there are some that are scam and there are some who were selling fake deals in order to make them say that they had a new deal posted on their site.

    Reply

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