Welcome to the Promoconomy

Discounts come custom-tailored to you. But at what cost?

For die-hard shoppers, the recession in the late 2000s was defined by promotions: daily deals, flash-sale sites and steep discounts that went beyond halfoff markdowns. At times, it felt like the whole world was on sale.

A decade later, the promotional landscape looks a lot different. Today you can download Honey, a browser extension that searches for and inputs promo codes for you (and can read and apply a coupon at checkout). Or have a mobile app called Shop It To Me give a gentle nudge when the price of that Self Portrait dress you’ve been eyeing finally drops.

And Snapchat and Instagram are reshaping promotions entirely, occasionally rewarding online purchases of Milk Makeup Glow Oil with chic carryalls or posting $5 delivery credits for Postmates.

Groupon’s still Groupon, albeit a shell of what it used to be. And mall stores are as thirsty as ever, with the year-round sales (and often dismal earnings) to prove it. But they’re more apt to trumpet their sales by text or mobile app than Valpak paper coupons.

These days, the promotions come directly, and often custom tailored, to you. But at what cost?

The lure of relevant deals is conditioning us to give up our personal information, said Joseph Turow, a professor at the Annenberg School for Communication at the University of Pennsylvania who studies marketing and digital privacy. “This is such a habit-forming activity that you begin to say, ‘Well, if I do it for shopping, I’ll do it for the government,’ ” he said.

He warned that it’s teaching you “that giving up your data is just a part of life.”

How do promotions get to you? On email, text, social media and the web, promotions are lurking everywhere. People may go online or on apps to find deals, or get recommendations based on their history as they browse a store with its app open on their smartphones.

Or people may be quietly, specifically targeted. “Some deals might get to us because a company that’s interested in promoting a certain type of thing has bought information about us from a data broker,” said Laura Moy, the executive director of the Center on Privacy and Technology at Georgetown Law School.

But many trade-offs are more transparent: you give us something, we’ll give you something. From the moment you log on to the site of Outdoor Voices, an athleisure brand, it touts an “exclusive birthday offer” in exchange for your email address.

Revolve Clothing offers 10% off for subscribing to its newsletter. Baggu, which makes those nylon bags beloved by Aidy Bryant, gives free shipping in the United States on orders more than $30. According to Honey, the number of carts an average member finds a coupon for each year has increased 33%.

The new deals

Offering freebies as enticements to build business is nothing new. Decades ago, blenders or toasters were synonymous with new bank accounts, and many can remember the days when credit card companies gave away T-shirts on college campuses. All of these required some sacrifice of personal data.

But now that information like Social Security numbers can be posted online, vulnerable to identity thieves and others around the globe, there is a lot more at stake.

At one point, retailers and brands bet on batch-and-blast emails, dividing shoppers into broad categories and matching them with products based on their purchases. This worked well — except, of course, when the algorithm got it wrong.

But Larry Thomas, the managing director of insight and growth at Accenture, a business-services company, said that successful promotions in the future will be even more finely tuned, offering

whatever is most relevant to a shopper at any point in time.

“If a hair-product brand knows it’s going to rain, and that you have hair that curls, it can recommend certain products to prevent that from happening,” Thomas said. “Google is a key platform behind that as well as Facebook.”

Despite the obvious privacy concerns, shoppers have come to expect such intrusions and, as academics like Turow have studied, shrug them off. Indeed, in a 2018 Global Consumer Pulse study of nearly 30,000 consumers, Accenture found 47% are frustrated when a company doesn’t use their personal information to finetune engagement. And 43% “prefer” (Accenture’s wording) to do business with a company that uses their data to customize promotions and pricing.

Turow’s research presents a bleaker picture. When it comes to resignation, consumers’ behavior is statistically unpredictable: Sometimes people will take a discount, sometimes they won’t. “What it reflects is a sense of futility about this,” he said.

“The problem in the old days was you didn’t necessarily know who was who, so you were trying to figure out who to give a discount to and who not to,” said David Bell, president of Idea Farm Ventures. “Now you can be much more targeted in your approach and relevant.”

Welcome, in other words, to the “sale for some.” The perpetually moribund apparel brand Perry Ellis last year teamed up with Bluecore, a retail marketing platform in New York, to tweak its messaging based on “discount affinity,” or a customer’s propensity to shop sales.

With its technology embedded in Perry Ellis’ site, Bluecore could automatically detect a change in prices, which it knew to show to shoppers who had either purchased or interacted with a product in the past (that is, reviewed but didn’t purchase).

It also identified shopping trends, like customers who buy, or were more likely to buy, with discounts. Those keeping a budget were exposed to more discounts, while spendthrifts rarely saw the brand devalued. The campaign outperformed Ellis’ traditional blasts, and its open rate was 102% higher than that of traditional campaigns.

The demise of coupons and circulars

As any millennial short on cash will tell you, the economic downturn and the rise of e-commerce helped inure them to deals. The generation’s predilection for shopping online, the deal frenzy of the recession, the necessity of finding discounts, given their flat incomes and student-loan debt, and the dominance of Amazon have all been factors in building what one might call the “promoconomy.”

“They can’t even afford to buy full price if they want to,” said Sucharita Kodali, an e-commerce analyst at Forrester Research. And according to a study by Harris Group, millennials are spending less on physical products and more on experiences like restaurants and travel, so retailers feel extra pressure to offer enticements.

“The one easy lever you can turn on tomorrow is a sale,” Kodali said. “E-commerce has just made the promotional landscape so much more nimble than it ever was.”

By their nature, paper coupons and circulars were infrequent, which did little to drive loyalty. Now that shoppers can buy nearly anything, “retailers are looking more at lifetime loyalty versus just getting the sale done,” said Charlie Graham, the founder of Shop It To Me. “Companies got burned by coupons being put online.”

Sitting out the promotion game

In an environment where discounts have become almost ubiquitous, it makes sense that some direct-to-consumer brands would try to stand out by eschewing promotions altogether.

It’s not uncommon to see a “reactivating” promotion for, say, 15% off your next order, as the underwear brand Tommy John offers, or a free gift with your first purchase of Ouai Haircare products. But there’s a danger to creating a “cheapening element,” as Bell of Idea Farm Ventures calls it, when you give too much away.

For trendy direct-to-consumer startups that are already paying through the nose to get noticed on Facebook, Google and Instagram, that means never going on sale, period. That’s why you won’t find a coupon for Emily Weiss’ beauty young company, Glossier, or Allbirds, which makes sneaker-like wool shoes.

“As soon as you start competing on price, you’re competing with the Amazons of the world,” said Diana Ganz, a founder of the Groomsman Suit, an online suit company that prides itself on not offering discounts. (To be fair, its versatile suits cost less than $200.) “That is a game that nobody wins.”