How Does Groupon Work?

An explainer on the popular social-media-driven shopping site

Groupon logoSigning up costs nothing, and Groupon is true to its word: You get a single e-mail a day, typically before 6 a.m. But it arrives with what Groupon defines as “an unbeatable deal”—the opportunity to get a 50 to 90 percent discount on a selected service, such as a restaurant meal, a car wash, a spa outing, or a wine tasting. The bargain is based on collective buying power, and once a certain number of people—determined by Groupon in collaboration with the company making the offer—have agreed to go for it, the deal is on, and everyone who has agreed to buy the coupon will be charged. A countdown clock on the website helps drive the drama.

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The offers are strictly for services—Groupon doesn’t sell consumer items, such as televisions or cameras, although it did once sell 5,000 memberships to the Art Institute of Chicago, upping that museum’s membership rolls by 6 percent in less than one day. The number of coupons that will be put up for sale is determined ahead of time. Some offerings, like the recent one for the Music Box Theatre ($16 for two tickets, two large sodas, and one large popcorn—a $31.25 value), are restricted to one coupon per person. Others, like the coupon for food items at the gourmet grocery Fox & Obel ($20 for $40 worth of groceries), allow multiple purchases by one person. Both the Music Box and Fox & Obel deals “tipped” early and sold out. But if you miss out, there is always another deal the next day.

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