Group Retail Therapy

Lorna Lewis, Systems Analyst by day but expert deal finder by calling, is almost addicted to it.

She used it for the first time in August, but she’s already bought at
least ten of them – one for a Pilates class, a wine tasting, she even
used one to tube down the Delaware River – and she’s loved them so much
that she’s gotten all her friends hooked on them too.

Thanks to people like Lorna, Groupon, a web site that offers daily deals or “groupons” to local restaurants, spas, stores, and more, has grown exponentially since its launch a mere year ago.

Read our review of 5 sites for can’t miss local discounts

The premise behind Groupon, and the secret to its success, is remarkably simple. Every day, they provide a deal that, in their words, is “something you’ve always wanted to try at a price that makes it impossible to pass up.”

However, unlike other online discounts, a Groupon only becomes available if a certain amount of customers commits to buying it. Once that “tipping point” is reached, and the business offering this steal of a deal has effectively neutralized the risk involved, the deal is on –until supplies last or midnight strikes.

Due to word of mouth, social media sites like Twitter and Facebook, and its savvy business model, Groupon has expanded to almost 30 cities (far surpassing any other collective buying sites), and its email list of subscribers has increased at a rate of about 40-50% a month.

Those kind of numbers aren’t just of interest to deal seekers and small business owners, but investors as well. Last week, Groupon announced a $30 million round of funding from Accel Partners, who’ve also invested in sites like Etsy, Facebook and walmart.com. Translation: we’re not the only ones who think Groupon’s on to something big.

Even before their holiday windfall, the “blogosphere” and “twitter-verse” have been all aflutter about Groupon in the last few months. I decided that it was time to see what all this fuss was about and find out if, as Groupon says, these deals really do feel “too good to be true.”

Read our review of 5 sites for can’t miss local discounts

I have my cupcake and eat it too

I asked Andrew Mason, CEO and founder of Groupon, to share what he considered the best deal they’ve ever offered.

While he was adamant that all of their deals are great, two particularly notable Groupons stood out: 64% off a year’s membership to the Art Institute of Chicago, and $20 for a $45 wine tasting at New York Vintners in Tribeca.

New Yorker that I am, I decided to check out New York Vintners and see if this $20 wine tasting would really be as good a deal as Mr. Mason purported. As I awaited the “Cupcakes and Dessert Wines”class I had signed up for to begin, I took the opportunity to chat with my fellow Groupon users.

“Oh, you’re definitely getting a deal.” Lorna and her colleague Wendy told me. Avid Groupon fans, they only had good things to say about the service. Groupon, coupled with the impact of the Recession, has encouraged them to change their old habits, try out stores they’d never been to or even heard of, and, of course, save money.

Wendy used to pass New York Vintners every day on her way to school, but had never been inside before.

“There are so many wine stores,” she told me, “if it weren’t for Groupon, I never would have come in.”

Defying my expectations of what I assumed would be a sip or two of a few clearance rack wines, we were soon given a copious glass each of Prosecco, Rousanne, Shiraz, Zinfandel, and Sherry – and an even greater amount of information about the wines themselves.

Add into the mix delicious bite sized morsels of chocolate, raspberry, and banana cupcakes, courtesy of New York bakers Butter Lane, a company that uses local organic dairy and emphasizes flavor over sugar, and it very quickly became apparent that this wasn’t just a good deal, but indeed a steal.

Read our review of 5 sites for can’t miss local discounts

“It’s had the single greatest impact on our business” said Shane Benson, co-owner of New York Vintners, about Groupon. Since advertising on Groupon, the store has seen an increase of about 60 people a day come through their doors, and the increase in business has allowed them to double their store hours.

Mason remarked  that an “appearance on Groupon validates these businesses as a cool part of their community” – Benson couldn’t agree more. He credits the impartiality and brand name appeal of Groupon with delivering a consumer base genuinely interested in what they do and the visibility they needed to make their business competitive.

Getting the Most out of Groupon

What you can’t know about Groupon until you try it is the genuine sense of community among Groupon users. For the moment, at least, being a Groupon user is kind of like being a member of a secret club.

You can of course go to Groupon events with already established friends, and Groupon encourages this with $10 coupons for referrals and Groupon gift certificates (around just in time for the Holiday Season). But, as Lorna told me, they’re also “a great way to meet new people.”

Whether on the message boards, in which users share their knowledge about the value of the deal itself (and staffers answer your questions about the fine print of a deal), on Twitter, where followers can enter spur of the moment contests for Groupon credit, or at the events themselves, Groupon users are linked together by one common thing: a love of the deal.

And now that I’m part of the club, I finally get what all the fuss is about.