Social-Commerce Sites Try Big-Ticket Items

Bargains are tempting, even more so when friends are egging you on. Hence the success of Groupon, the "social commerce" site that offers huge discounts, but only if enough people agree to make the same purchase by a set time. Part Sunday circular, part social network, the two-year-old site is expected to hit $1 billion in total sales by the end of 2010. The stratospheric number is all the more impressive considering that Groupon mostly promotes low-price, local deals like restaurant coupons. Now the site and its ilk (like LivingSocial and TownHog) want to know if their addictive model can apply to big-ticket purchases. A social-commerce site in China provides a clue. In September, TaoBao posted a group deal for Mercedes Benz–made Smart cars, which retail for as much as $23,000, at 20 percent off. Less than four hours later, 205 customers had put down a deposit—Smart expected to sell that many in 21 days. In the U.S., Groupon has dabbled in high-dollar offers itself, offering corrective-vision surgery for $3,250 (down from $5,000) and $3,500 for a zero-gravity "astronaut experience" inside a jet.

Consumer advocates are concerned. Impulsively signing up for discounted yoga is one thing, but buying LASIK on a whim? "People make bad decisions when there are short-term, really tight deadlines," says Scott Crawford, CEO of DebtGoal, which helps consumers unload debt. High-dollar social commerce hasn't caught fire quite yet; Groupon attracted only six buyers for the surgery, for example. But if the housing crisis proved anything, it's that Americans will go out on a limb, especially if they see their neighbors doing it. When prices reach the thousands, think for yourself.

Social-Commerce Sites Try Big-Ticket Items | Business