RetailMeNot wins the holidays by not overthinking it

By Erin Griffith , written on December 25, 2013

From The News Desk

Each year a new wave of ecommerce companies whips up an innovative business model. There was group buying, then flash sales, then subscription commerce, sampling commerce, and "stuff in a box." There is always a new kind of marketplace, a new brand of "social commerce," or a new twist on personal shopping, stylist curation and showroom shopping.

But this week I remembered how basic this stuff is. No need to over think it: people love coupons.

I was reminded of this while visiting family in Ohio. Coupons, savings and sales were a  topic of conversation. My mom based our entire shopping mall game plan around which coupons she had ($50 off if you spend $100 at Elder-Beerman! 20 percent off home goods at Macy's!) and we ran into friends of hers doing the same. (Notes were compared, tips shared.)

They are not "extreme couponers" who stockpile a year's worth of toilet paper because they saved three cents a roll. They just love getting a good deal.

It's not about the money, it's about savvy. Shopping is like a game to see how well you optimize the deals you get, and only a novice pays full retail. Coupons, promotions, credit cards, buy eight get a toaster, any kind of savings loophole, my mom has a separate wallet just for department store coupons, gift cards and receipts. Negotiating our check-outs felt like an exhilarating cross between Supermarket Sweep, Mall Madness, and a fourth grade math problem. "If you spend three more dollars and use your Sears card, you can get another 20 percent off," the cashier informs me. "How about I throw in this coffee mug that's already marked down to $5?"

This is why JC Penny's bold move to eliminate coupons was disastrous. By killing off the coupons in lieu of offering "fair and square" low prices every day, CEO Ron Johnson took the thrill of the hunt - the gamification, if you will -- out of shopping. That may seem more rational than artificially inflating prices only to slash them for sales. But consumption isn't rational. Johnson lost his job and almost tanked the company because he didn't understand that.

It makes sense, then, that the one app my mom and her friends swear by that I wasn't familiar with is RetailMeNot, the digital coupon marketplace. They raved about it: "It's awesome. You walk into a store and it tells you all the deals!"

That is a much stronger endorsement than any pitch in my inbox. These are the same women that were sharing craft projects on Pinterest before any of us tech bloggers were hip to it.

RetailMeNot isn't new, though, or really even under the radar. It's a publicly traded company valued at $1.75 billion (stock ticker: SALE, of course). Austin Ventures, Google Ventures, Adams Street Partners, Norwest Venture Partners, IVP and JPMorgan invested more than $300 million into the company. RetailMeNot's portfolio of coupon aggregator websites have been visited 500 million times in the last year.

The company had a strong holiday season: App launches increased by five times over last year on Black Friday and by three times on Thanksgiving. RetailMeNot's app hit #2 in the App Store and has remained in the top 20 overall the whole month. (It's currently #2 in lifestyle.) It's the only shopping app in the top 50, ahead of Amazon and Walgreens.

The app's popularity is a nice reminder that, amid all the business plan "innovation," coupons will always be a pretty big deal.