Secrets of Online Shopping Discounts

May 8, 2008 — -- The economy may be sluggish, but online shopping is still going strong.

Hoping to find a deal? A quick visit to any number of coupon-sharing Web sites yields a code for free shipping, 20 percent off, or both. Just copy the code, paste it into the promotional code box, retabulate and voila: Your order just got cheaper.

Point. Click. Buy. It's so easy.

Maybe too easy.

Behind the computer screens major retailers are balking at customers' no-holds-barred access to discounts, demanding that their coupon codes be removed.

In this "David and Goliath" scenario coupon-sharing Web sites are caught in a conundrum: Do they remove the codes or keep them? As it turns out, bargain hunters may be the ones making that decision.

For price-conscious online shoppers, the adrenaline rush of finding a good deal often justifies the purchase. The decision whether or not to spend $200 on a coat becomes easier when the price without a code would have been $250.

Anwulika Okafor, 27, a writer living in New York, scours Web sites every week for great deals -- like the Bloomingdales sale she found earlier this year.

She had never shopped at Bloomingdales.com before, but a coupon code offering an additional 40 percent off sale items proved irresistible.

Online coupon research often leads to monthly purchases for Okafor whose clothing-buying habit thrives, despite the confines of a tiny studio apartment, largely due to her "strategic folding" technique.

While on Bloomingdales.com, she resisted the urge to buy "an obscene amount of stuff," instead spending a little under $350 for 14 items.

"I would never have went to the site if I hadn't seen it on RetailMeNot.com," Okafor said. "I don't always go on to look for a specific store's coupon code. The great thing about [RetailMeNot.com] was that you could roam through and find a deal."

RetailMeNot.com provides a forum for users to share codes and other online store promotions. Users then rate the codes by effectiveness, a higher score meaning that the code worked for most people who tried it. The site also posts links to ongoing sales provided by the retailer.

Guy King and Bevan Clark, RetailMeNot.com's Australian co-founders, say 90 percent of the visitors to their site are from the United States.

Since the Web site's inception in November 2006, they have seen traffic grow from 2,000 users a day to more than 130,000. King attributes their success to "the whole people power thing."

Sites that offer online codes typically make money when users click through links to retailer sites, but RetailMeNot posts codes without requiring users to click.

"We can force users to click on a link to view coupon codes and as a result we'd get a lot more commissions but that makes the site a lot harder to use," said King. "It's really the community that is responsible for success in some ways. Even with a staff of 50 we couldn't generate this amount of content."

But at the beginning of the year Okafor noticed that some user-submitted coupon codes were disappearing, replaced by a message saying, "Sorry for the inconvenience but this merchant has specifically requested to have all user contributed coupons removed from the RetailMeNot system."

To Okafor's chagrin, J.Crew was one of them. "That one really stuck out to me. I took offense to that," said Okafor, who has been a faithful J.Crew customer for many years.