Deal or No Deal: Social Shopping with Groupon, LivingSocial and Scoutmob

I'm David Eckoff. I'm on a mission to talk with businesses in Virginia Highland that use social media to build their business and clients.

This week, we'll explore how local businesses use "social shopping" services such as Groupon, LivingSocial, and Scoutmob to grow their businesses.

First, a primer in how social shopping works.

The social shopping services each offer a "deal of the day" for a business such as a restaurant, spa, or boutique, in each of the cities they serve. The deals are usually in the range of 50 to 60 percent off.

As a consumer, you register online for a free account with the social shopping services of your choice, specify that you live in Atlanta, and then you receive daily e-mail newsletters from the services with their deal of the day. If you have a smart phone such as an iPhone, there's an app for that, as they say.

With Groupon and LivingSocial, when you see a deal that you like, you purchase a coupon online. With Scoutmob, there's nothing to purchase up front; just say you want the deal and it is yours for free. In all cases, after you receive the coupon, you visit the local merchant and redeem it.

You Always Remember Your First Time

Social shopping is relatively new.

The first time I tried a social shopping deal was for Virginia Highland restaurant American Roadhouse in August 2009. We like so much, I purchased not just one, but three coupons via Groupon. I thought for sure we'd use all three by the expiration date of Dec. 30.

Of course, I forgot about the coupons until Dec. 29 in the evening. "D'oh!"

We used one of the Groupons Dec. 30 for breakfast. Returned for lunch and used another. And thankfully, the restaurant owner allowed us to use the final Groupon the next day, even though it had expired.

The experience made me think twice about whether these deals of the day always turn out to be a good deal.

The next week, when I saw Scoutmob's inaugural offer, for restaurant in Virginia Highland - with no purchase required to get the offer - I liked what I saw. Get a Scoutmob coupon and if you don't use it, there's no risk. Scoutmob, I predicted, would become very popular with consumers.

What's Great About Social Shopping

Things often get better after the first time. And I learned that social shopping can be great for consumers, local merchants and the social shopping services themselves.

Consumers get to find out about and try local businesses they haven't tried yet. And save money.

"It's all about location, location, location," Atlanta resident and frequent visitor to Virginia Highland Grayson Daughters, said. "Not just a deal."

For local merchants, social shopping is a new way to market their businesses. Unlike a traditional coupon or TV ad where a merchant pays up front and has no guarantee their ad will motivate consumers to shop, merchants are able to translate online marketing to real traffic and sales.

And we're talking the potential for big traffic.

"We did a couple of Groupons in 2010," Michael Erickson of Fifth Group ( and ) told me. "We sold over 6,000 in the summer and over 3,000 in the winter. So a total of almost 10,000 Groupons. It brought in a lot of people who had never been to our restaurants, which is fantastic."

That's a lot of business.

And the social shopping services make money along the way. A lot of money. For example, Groupon (founded in late 2008 and described by Forbes as the fastest growing company ever) has annual revenue reportedly around $2 billion per year. That's billion with a "b". Fifty percent of that revenue is paid out to the local merchants Groupon does deals with, but that's a lot of buckaroos.

Next time you're enjoying your Groupon for a local Virginia Highland restaurant, think about this: Groupon recently spurned a $6 billion acquisition offer from Google, and is pushing ahead with plans for an initial public offering of stock, that could value the company at $15 billion or more.

As an entrepreneur, I wish I thought of that business!

Social Shopping in Virginia Highland

Social shopping has taken off in Virginia Highland.

Local merchants that have used the various social shopping services include Murphy's, La Tavola, El Taco, American Roadhouse, , , , and more.

The deals are popular with many people in the neighborhood.

"I like the 'deal' and the excitement of trying a new place," Virginia Highland resident Liam Pelot said. "My favorite deal has been from Murphy's from Scoutmob."

Pelot isn't alone in saying that.

Scoutmob's first deal in January 2010 proved so successful, that Murphy's did it again in October, with more than 10,000 people claiming the deal according to Michael Tavani, co-founder of Scoutmob.

"Murphy's had 90 to 100 tables per day over three months from Scoutmob," Tavani said. "Those are astonishing numbers."

"Our business objective was to get additional exposure," Carolyn Prebil of Murphy's said. "We wanted the chance to get our name out to those who might not know Murphy's yet.

Mission accomplished.

Merchants Choose

With so many social shopping services to choose from, I was curious how Murphy's happened to select Scoutmob.

"We looked at the other companies, including Groupon," Prebil said. "We decided on Scoutmob because it’s the biggest around here."

Scoutmob even has fans in local merchants who haven't used it yet.

"There's nothing cooler than Scoutmob," Erickson of Fifth Group said. "I use it. I think it is cool. I love that it isn't just about a discount. Their website has all sorts of great content. They have local content from local bloggers, and contests, it's a dynamic site that also happens to have a discount offering."

Fifth Group has used Groupon for its two social shopping campaigns.

"Groupon approached us," Erickson said. "I also knew someone at Groupon that I had worked with previously at City Search. And she is someone I trust implicitly."

Fifth Group's business objective was to drive sales during the critical summer months when sales dip.

"We got Groupon to agree to a three month expiration, which was great, normally they look at six months or a year," Erickson said. "We created a package, a Fifth Group Groupon, we had a Groupon for every one of our restaurants and you could pick. That helped us drive people in for brunch who might have only come to us for dinner."

How Great is Virginia Highland for Social Shopping?

"Virginia Highland is a sweet spot neighborhood for Scoutmob," Tavani said. "When a Virginia Highland business offers a Scoutmob, we know it's going to take off. More people are interested in it. Almost everyone is happy to go to Virginia Highland, even from elsewhere."

The folks at LivingSocial agree.

"Virginia Highland is beautiful and eclectic, it is part of what makes the city so unique," Kati Ryan, LivingSocial sales rep in Atlanta, said. "It has some of the best restaurants, shopping spots, and an overall amazing experience." 

Coming Next

In Part 2 of this report, I'll cover what merchants and consumers need to know about the different social shopping services to get the most from them, with advice from Virginia Highland businesses and residents. And in Part 3 of this report, I'll cover the dark side of social shopping - what's not great, including a story from one Virginia Highland resident that you don't want to miss.

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