In the economic wasteland of the past three years, the biggest success story has been a website that gets us to buy stuff we never knew we wanted: helicopter-flying lessons, hot stone massages, professional photo portraiture, obscure ethnic food, hot air balloon rides. More precisely, what we buy at Groupon—the two-year-old startup that, with projected revenue of more than $500 million this year, was called the “fastest growing company ever” in a recent Forbes cover story—is the right to buy all that stuff at a huge discount, so long as we all act fast. In other words, what Groupon sells (as its clever name indicates) is coupons, but with a social twist. It’s been such a huge moneymaker that scores of copycats have emerged, including other startups like LivingSocial and 8coupons. Established online presences like Yelp and OpenTable have also jumped in; the biggest and most recent entrant is AOL, which in October announced its own Groupon clone, Wow.com.

Like its competitors, Groupon makes money by turning its audience into bargain junkies. Every day, customers check their email or the Groupon website to find out about the daily deal in their city. (Groupon already operates in more than 100 cities nationwide.) For the coupon to become valid, a certain number of users must agree to buy it. But then, after the offer “tips,” they have just 24 hours—or less, if it sells out—to pay their money and lock in the markdown. As Andrew Mason, Groupon’s 30-year-old founder and CEO, sees it, this tantalizing window of opportunity gives people the license to indulge in experiences they wouldn’t otherwise pursue. “That’s the beauty of the model,” he says. “We’re using these game mechanisms to trick people into getting out of the house and doing the things they always wanted to do.”

Take a step back, though, and what Groupon represents is something far bigger. It’s the mainstreaming of a new current in American consumerism, an attitude born of the Internet’s DIY ethos and nurtured by the hard economic times. One might call it retail hacking: the reconception of shopping as not just a full-time job but a contact sport, a scrum in which consumers increasingly refuse to buy on the terms dictated to them. A whole network of so-called deal-hunting sites, each with a large and devoted community, has sprung up for users to trade inside tips about little-known bargains; the largest of these sites, SlickDeals, has more than 700,000 registered members.

In this passionate consumer underground, techniques for chiseling a few percentage points (or more) off a sticker price can quickly spread to millions of shoppers. The process of selling a DVD player or even a new razor to the growing ranks of self-educated buyers is becoming as tortuous as selling them a new car. GetHuman.com, a continuously updated list of direct customer service lines and telephone-prompt guides, is undermining the ability of companies to resolve calls with automated systems. Consumers who have learned to haggle on prices at large chain stores—Target, Home Depot, Best Buy, and more—share their stories and methods on sites like the Consumerist, a blog that has become a hub for retail hackers. When Ely Rosenstock, a 29-year-old social media consultant from New York, wanted to cancel his Verizon service and buy the new iPhone, he found a loophole that let him leave his two-year contract with no termination fee; after he made this argument stick with Verizon customer service, he posted a detailed how-to video on YouTube that has been viewed more than 180,000 times.

As recently as five years ago, it would have taken years of dedicated trial and error for consumers to develop these techniques on their own. Now, thanks to forums that aggregate the collective urge to save money, novice deal hunters have access to FAQs and tutorials addressing everything from the inventory cycle at Target to methods of handling hostile cashiers. For those who know where to look, these sites form a sort of WikiLeaks of secret deals, a searchable directory of rock-bottom prices and money-saving techniques as labyrinthine and cunning as the retail universe it seeks to map.

In this world, each product has two prices. First there’s the suggested retail price—”a blatant lie,” as Jeffrey Tan, a top-ranking SlickDeals user, calls it—paid by everyone else. Then there’s the real price, available only to the deal-hunting elite.

Most retail hackers try to get their edge by manipulating one of the oldest promotional tools around—the coupon. The origin of the coupon is usually traced to the late 19th century, when a former drugstore owner named Asa Candler distributed small certificates entitling the bearer to a free glass of his new tonic, called Coca-Cola.* Ration books distributed during World War II established an indelible link in the American mind between the act of clipping and the virtue of thrift. By the 1960s, coupons were a fixture on the retail scene; one industry leader, S&H Green Stamps, claimed to print three times as many stamps as the US Postal Service. Shoppers could accumulate the stamps from participating stores and then redeem them for such rewards as toasters, clocks, and insurance policies.

At the turn of the millennium, coupon use began to slide, from 4.6 billion coupons redeemed in 1999 to 2.6 billion in 2008. Then the recession hit, triggering a coupon resurgence, driven in large part by the Internet, before anybody had even heard of Groupon. Millions of unemployed consumers rediscovered the coupon as a way to generate money—or at least cut household costs—during their idle hours. And retailers responded to flagging sales by invigorating their offers. The value of the average coupon has risen from $1.09 to $1.37 since 2005. Redemptions grew by 27 percent in 2009 alone, with Internet coupons leading the way, rising more than threefold. Online coupons have proven stickier than their paper counterparts, accounting for around 1 percent of all coupons issued but nearly 10 percent of those redeemed. According to Nielsen, the “enthusiast” couponers who use online offers most are likely to be relatively young and high-income, with 60 percent making more than $50,000 a year.

To see this ur-coupon and read its backstory, check out “First Coupon Ever” in issue 18.11, online.

The retail industry is still adjusting to the new generation of coupon shoppers, many of whom aren’t content to limit themselves to one or two deals per trip. Some of these so-called super-couponers have perfected a maneuver called stacking—combining multiple coupons on the same item, generally a manufacturer’s coupon with a retailer’s. Another technique is rolling—using earnings from retail loyalty programs (for example, CVS Extra Bucks) to buy products that earn still more points, generating a continuous flow of extra earnings. The online boards teach all these tricks and more. “Don’t be scared! You can do this!” begins one SlickDeals FAQ, before it launches into a series of links to newspaper coupon-insert schedules, store-by-store coupon acceptance policies, and thousand-line wikis with deals alphabetized by product and coded by state. There are coupon swap threads as well as RAOK (random act of kindness) threads in which coupons are given away to the first user who requests them. Members of “coupon trains” circulate their surplus coupons through the mail, taking what they need and adding what they have. “Coupon fairies” act as anonymous benefactors, bringing extra coupons to the store and leaving them on the applicable products.

“These wack-jobs who spend 20 hours a week stacking coupons? That stuff drives us batty,” says John Morgan, executive director of the Association of Coupon Professionals. “They dance all over the rules. These zealots may be following the letter of the law, but I don’t think they’re respecting its spirit.”

Indeed, manufacturers and retailers do not issue coupons with super-couponers in mind. Sometimes coupons are designed as “loss leaders” for stores, which hope to lure new or irregular customers inside. Other times they’re inducements for consumers to try—and hopefully get hooked on—a new product. But most often they’re used for what economists call price discrimination. Consider a product that costs a retailer $10 and sells for $15. Somewhere out there, the theory goes, are price-sensitive shoppers who would pay $12 if given the chance—still a profitable sale. By targeting this group with a $3 coupon, the store generates additional sales at a margin of $2 per unit, without giving up any of the $5-per-unit profits from the price-insensitive group.

Super-couponers complicate this theory considerably. According to Donald Lichtenstein, a professor of marketing at the University of Colorado at Boulder, super-couponers have learned to ignore “acquisition utility,” the pleasure and value one obtains from, say, a box of cereal. Instead, they peg their shopping decisions to “transaction utility,” the difference between what they’re getting the cereal for and what they think the cereal is supposed to cost. In other words, super-couponers don’t perceive a grocery item as food, at least not until they exit the store and serve it for breakfast. On the shelf and in the cart, the super-couponer evaluates products with the cold-eyed calculus of a trader.

Four years ago, Michelle Harrison, a 38-year-old CPA and mother of two, was just a casual deal hunter. During special sale weeks at Lowe’s Food Stores, she would spend an hour clipping The Charlotte Observer and be able to come back with perhaps $125 worth of groceries for $25. Then, at church, she met some other mothers who told her they could turn $25 into $250.

“My competitive type-A behavior kicked in,” she says. “I asked myself, what am I not doing that I should be doing? What’s out there that I don’t know about?”

So began what Harrison calls her “hardcore” phase. She started buying four or five copies of the Observer each week; whatever she didn’t use, she would swap online at Hot Coupon World, where she soon rose to the level of moderator. She learned how to time prices and decipher barcodes, and she happily shared her knowledge with anyone who wanted to learn. As the economy turned sour, Harrison began to distribute groceries from her own “stockpile” (which grocery deal hunters inevitably acquire) to local families in need. On a site called CharlotteMommies.com she developed a following of area mothers, and together they established an informal code among themselves—share what you know, share what you have, and obey all store and coupon policies.

One morning in September, Harrison and four of her disciples gather at a coffee shop to trade couponing stories. Harrison is dressed sensibly in sandals, black pants, and a black blouse with silver appliquè9. On the table in front of her, next to her croissant and Diet Coke, is a slender business envelope containing more than 30 coupons.

One acolyte, Lolly Miltz, explains her own attitude toward the project: “I try to keep it fun. I walk in, introduce myself to the manager, and say, ‘You better call the police. I’m getting ready to rob ya!'” Miltz, who has a breezy manner and two bright yellow swoops of hair, holds in her hands a massive purple binder containing maybe a thousand coupons—some clipped from Sunday newspapers, some printed from the Internet, some purchased on eBay. “I wonder why they waste money on advertising,” she muses. “We’ll buy whatever they want us to buy—as long as they pay us to buy it.”

A Day of Deal Hunting

Warning: Retail hacking can be a full-time job. Here’s what your daily routine might look like if you got serious about tracking down bargains. (All times Pacific.)



—M.S. 5:10 am Check email for Groupon’s Deal of the Day and LivingSocial’s 1-Day Deal. 8 am Log in to Hot Coupon World and search for grocery deals in the Coupon Database. 8:30 am Expand your coupon trove at the Printable Coupons section of RetailMeNot .com. 9 am Add to your arsenal of paperless coupons by loading a batch onto your phone at Cellfire.com. 10 am Swing over to Newegg.com for the daily Shell Shocker deal: typically discounts of 30 percent or more on tech gear. Noon On Tuesdays, this is the optimum time to find the cheapest domestic fares at Kayak, Hotwire, and other bargain travel websites. 2 pm Visit the Freebies section at Buxr for a compendium of links to free trial products like detergent, over-the-counter medicine, and magazine subscriptions. 3 pm Check out 6pm.com, a sister site of Zappos.com that sells brand-name apparel at outlet-store prices. 5 pm Browse the Best Deals section of FatWallet.com. 5:30 pm Scope out the Clearance section of SmartBargains.com, which offers apparel and furnishings for as much as 90 percent off. 6 pm Peruse the Gold Box section of Amazon .com for the Deal of the Day and the ever-changing Lightning Deal. 8 pm Hit the front page of Spoofee.com to browse a broad mix of user-rated daily deals from around the web. 9 pm Look over the various offers and coupons at Dealspl.us, where user votes determine which deals appear on the front page. 10 pm A new Today’s Woot—a deeply discounted deal-of-the-day—goes live at Woot. 11 pm Scan the Editors’ Choice tab at Dealnews, a curated bargain-hunting site. Midnight Check the Hot Deals subforum at SlickDeals for new deals on Xbox, PlayStation, and other gaming systems.

This is the fourth day of Super Double Coupon Week at Harris Teeter, a southeastern supermarket chain. Each day this week, Harris Teeter will double the face value of most coupons to a maximum of $1.98 apiece. So Harrison has been visiting her local store once a day, every day, armed with a carefully selected battery of coupons. Her goal today is to bring home $80 worth of merchandise while spending less than a dollar out of pocket.

Harrison enters Harris Teeter shortly after 11 am. She selects a cart, makes a quick right toward the produce section, and picks out an organic red bell pepper for $1.99. Taking the first coupon from her envelope—$1 off organic produce, $1.98 after doubling—she places it in the front-left corner of her cart. “I’m on a mission here,” she says, her shoes tapping out a staccato rhythm as she moves over the tiled floor. “Please slow me down if there’s anything you don’t understand. You’ll see that I’m putting my coupons in two stacks—one for those that double, one for those that don’t.”

Next comes a bag of cherry tomatoes and three jars of Peter Pan creamy peanut butter, free with a doubled coupon—called a blinkie because it was dispensed from one of the blinking coupon boxes installed in grocery store aisles. This particular coupon came from a nearby Food Lion. The barcodes on the Food Lion blinkies start with 5, Harrison explains, and these will double this week; the Harris Teeter blinkies start with 9, and these won’t double.

In aisle 1, Harrison grabs a can of Hanover kidney beans, free with a coupon Hanover sent her after she left a positive comment on its website—a gesture she tries to make for some company every day. Her envelope contains seven more coupons obtained through online compliments, as well as four from a ConAgra Foods booklet, 13 clipped from newspapers, and one Internet coupon found via a post at Hot Coupon World.

Harrison is moving quickly now, like a Pac-Man master running patterns through the maze. The envelope emptied and the cart filled, she pulls up to register 6 and a familiar face, Jennifer K., an associate in her early twenties.

“You want me to send ’em down?” Jennifer asks, as Harrison loads the conveyor.

“Yeah, I’ll bag for you,” she replies.

“Customer service to 6!” Jennifer announces, leaning into her microphone.

“If you save over a certain amount, they need to get an override,” Harrison says. She twists her beaded bracelet as the groceries scan, her face taut with the bridled anticipation of a card counter cashing in chips.

“The total is $1.77,” Jennifer says. “You saved $78.15.” Harrison pays, scrutinizes the receipt, and then picks up her bags and walks over to the customer service counter. The red bell pepper, priced at $1.99, has erroneously rung up at $2.79 plus tax. Harrison explains this error to Michael W., who, per Harris Teeter policy, reaches into the drawer and gives her a $2.85 cash refund.

“I actually made money on this trip,” Harrison says, beaming as she heads for the door. “A dollar and eight cents.” Outside, she begins transferring the day’s haul into the back of her Hyundai Tucson. First she has to clear away a cache of Nestlé Aquapods—$3 on sale from Food Lion, yielding a $3 Aquapod coupon, which she rolled a couple of times. Facing Harrison’s van is a black SUV. A toddler waits in an empty shopping cart while her father loads groceries into the backseat, too busy to notice when his cart—and child—begin to roll slowly, then faster, down the parking lot’s gentle slope toward a parked car. It takes less than three seconds for Harrison to assess the scene, dart past the front of her Tucson, and make the save.

“Happens to me all the time!” she says to the father before he has time to thank her.

There are millions of Michelle Harrisons out there, finding one another—and training one another—through the vast online network of deal-hunting sites: GottaDeal, RetailMeNot, Buxr, Hot Coupon World, WeUseCoupons, and many, many more. On the largest of these, SlickDeals, users flock to subforums that trade deals and tricks for every major national or regional chain. Users collect reputation points and move up through 10 levels—from Learner to Journeyman to Grand Master. These ranks are earned through such painstaking labors as scanning newspaper inserts, compiling data from these ads into easy-to-read text, and posting deals that moderators deem worthy of inclusion in the Hot Deals forum.

The users themselves are as diverse as the sites they populate and the stuff they buy. Jeffrey Tan, whose nearly 44,000 posts as yuugotserved make him one of SlickDeals’ top contributors, is an 18-year-old college freshman in New York City who spends an hour or two every morning skimming and posting new deals from Newegg.com, Dell .com, and Sears.com. The user Slowtech oversees a team of people who reply to queries and write up summaries of threads related to Target. Cathy Zeiler, aka ladycat, accesses SlickDeals daily through her dial-up modem. Once a week, she fills her minivan with groceries and distributes them to as many as six low-income and out-of-work families near her home in Wichita Falls, Texas. “I always did sales, but not like this,” she says. “The Internet gave me the resources to take it up a few levels.”

In some cases, retail hackers take an attitude toward their targets that is literally paramilitary. Every year, Dev Shapiro, the 31-year-old moderator of the Black Friday boards at GottaDeal.com, plots a map of his own favored prey, the Best Buy store a few miles from his house. Starting as early as the Monday before Thanksgiving, a full 100 hours in advance, Shapiro arrives at the store to set up his base camp: tent, propane stove, rented Porta Potti. (“I charge a buck a dump,” he says. “It pays for itself.”)

Using live recon from inside the store and information gleaned from GottaDeal—which starts posting leaked Black Friday circulars from major retailers as early as August—he draws up a plan of attack. He merges his personal shopping list with those of several friends, who join him during the final hours of his vigil. When the doors open, his team moves with the deadly swiftness of a Special Forces raid—one man to the laptops, another to GPS systems, another to the DVDs, another to the Blu-rays, and so on. One year, Shapiro brought home three GPS units, a digital camera, four laptops, three flatscreen TVs, and several gigabytes of RAM—nearly $10,000 in merchandise at face value, for less than $1,500. “Black Friday is all about information and advance planning,” Shapiro says. “You have to know where to be when.”

Shapiro’s take-no-prisoners approach to shopping is, on one level, a holdover from his profession: He makes his living as “director of logistics and intelligence” for Congregational Security, a Dallas-based firm that specializes in protecting places of worship from terrorism and financial crimes. Shapiro’s job, as he describes it, is to analyze threats. He speaks Hindi, Hebrew, and Arabic, which he uses to scan online message boards frequented by al Qaeda. He says he has worked with former Mossad officers to train parking lot greeters and arranged for bomb-sniffing dogs to scour the hotels of visiting foreign dignitaries. Most of this work happens at a desk a few feet from a rumpled Ikea bed in his parents’ ranch house in suburban Dallas, a life that seems equal parts James Bond and Seth Rogen. “I get to play with cool toys, and I get to learn,” says Shapiro, who has received training in 9-millimeter combat shooting and tactical driving maneuvers. “My job is about being prepared.”

But the hyper-disciplined assault is also, increasingly, the approach taken by all online deal hunters—everyone from college students to urban professionals to suburban mothers like Harrison. With anxieties aggravated by the recession and amplified online, they are exploiting information and employing coordination to dictate what they want to buy, how they want to be treated during the transaction, and what they’re willing to pay.

Until recently, coupons have almost always been designed to advance the interests of sellers, not buyers. As structured by retailers and manufacturers, coupons will offer the minimum economic inducement necessary to spur the sale. Perhaps the most revolutionary aspect of the Groupon model is that it begins with the collective buying power of the audience, whose sheer numbers—and proven eagerness to buy—give the startup enormous leverage with retailers. As a result, Groupon and its competitors are reimagining the coupon as a tool for dragging prices down to unprecedented lows—not a few bucks off a single product but 50 percent off restaurant bills, haircuts, museum tickets, and jeans from the Gap. Groupon keeps a full half of this halved price; the benefit to the vendor comes from exposure on Groupon’s voluminous email list, as well as the rush of new customers who will flood through the door, Groupons in hand.

For vendors, the hope is that enough of these deal seekers will convert into regular buyers to justify giving up three-quarters of the revenue from their first visit. For customers, though, it’s a whole new way to look at shopping. It encourages impulsiveness and experimentation, harnessing the ever-shifting, gamelike terrain of the online dealscape, offering users not just a collective price but a collective buying experience. After purchasing a Groupon, users can return to the site and trade stories of their adventures in retail. They get the same cycle of communal chasing and gloating offered by sites like SlickDeals and GottaDeal without the hard work of tracking down deals and negotiating prices—Groupon’s sales team handles all that.

Andrew Mason, Groupon’s CEO, doesn’t have an office. He roams around the company’s downtown Chicago headquarters, which are spread across multiple floors of a converted warehouse on the Chicago River. Even as Groupon has grown to nearly 2,700 employees (and a mammoth valuation of more than $1 billion), Mason has kept his corporate culture even more casual and ostentatiously weird than his Silicon Valley counterparts. When I visited the offices, managers were leading a group of new employees through an elaborate alternate-reality game that involved cutting open teddy bears with knives. The game even has its own office, at the end of a row of sales staff—a place called Michael’s Room, containing a bed with scorched blankets and a toilet filled with candy.

As divergent as such stunts might seem from Groupon’s core business, Mason believes they share an essential aesthetic—they’re “purposefully random.” To his mind, the most effective coupons aren’t the ones that save you money on things you’d buy anyway; they’re the ones that come from out of nowhere, giving you license to buy something you otherwise wouldn’t. Some businesses, for their part, have complained that Groupon represents consumer interests too aggressively, attracting hordes of deal-hungry customers who never appear again. Some users are complaining, too—of long lines at events and small businesses that can’t handle the surge in traffic. But Groupon is trying to address both of these issues, allowing merchants to set a cap on the number of Groupons for each deal and refunding money to dissatisfied customers.

Because Groupon does all the work for its users—finding the business, negotiating the deal, delivering the coupon—it doesn’t cultivate in its users the expertise of deal hunters like Shapiro and Harrison. Groupon users are not hackers; they’re ordinary consumers who, instead of performing their own laborious research, trust Groupon to act as an honest broker on their behalf. This isn’t so different from the traditional retail model, in which the consumer is dependent on the vendor and happily buys whatever’s on sale.

It’s easy to imagine this pointing toward a brighter future, with the technologically enhanced, customer-friendly coupon siphoning larger and larger shares of promotional budgets directly into consumers’ pockets. One can also imagine an alternate scenario, where deep-discount online coupons turn into a last-ditch measure for businesses that can’t draw enough traffic with their asking price. Larger retailers could even grow wise to the latent tracking possibilities of online coupons and comb purchase histories to further manipulate our behavior. But regardless of how this technological arms race ends, it’s clear that the old method of unilateral pricing, with consumers groping around in the dark for the real discount, can’t possibly survive. The deal-hunting horde has the tools to ensure that no bargain stays secret for long.

Matt Schwartz (mattathiasschwartz.com) wrote about a Korean financial blogger in issue 17.11.