Sears launching online coupon program

Sears Canada Inc. has found a new way to get consumers hooked on deals – this time in a virtual group-buying promotion.

On Wednesday, it will launch its first online group-buying coupon, a three-day offer of a $50 purchase for $25 after teaming with group-purchasing specialist Buytopia.ca. Sears is among a small band of major retailers in North America that is testing the waters of group-buying vouchers, an initiative used mainly by small businesses.

"It's a great opportunity to bring consumers into the stores – and to bring a new younger demographic into the stores," said Michele Romanow, co-founder of Buytopia.ca in Toronto.

All the rage among local retailers and restaurateurs, online group-buying coupons are being picked up by heavyweight chains. U.S.-based clothing giant Gap Inc. recently offered $20 worth of T-shirts for $10 through a Groupon promotion at its Old Navy discount chain; beauty-product retailer Body Shop also has run Groupon deals.

But the retailers are risking having customers become as addicted to group-buying coupons as they are to other forms of discounting, giving shoppers another reason to delay purchases until another online group-voucher promotion arrives.

"It's a risky game," said Richard Talbot of retail specialist Talbot Consultants International in Victoria. "The consumer has the impression that they're not getting the best deal on a regular basis ... It cuts into customer loyalty and there's not much customer loyalty left today."

Nevertheless, for a retailer such as Sears that has suffered weak financial results and a loss of market share, its attempt to break new ground with online vouchers is worth the risk, Mr. Talbot added.

Online coupons can bolster customer loyalty, according to Buytopia. Local merchants that used its group vouchers have seen a 30- to 60-per-cent jump in repeat customers, Ms. Romanow said. They are mainly in the 18-to-34 age group.

The website, which launched last December, has also found that the vouchers tend to encourage customers to buy even more than the amount on the coupon – often as much as double the value, she said.

Buytopia is breaking new ground in working with Sears because so far the site has only teamed with small businesses, she said.

At Sears, the Buytopia initiative is one of the earliest signs that its new chief executive officer, Calvin McDonald, wants to shake up the sleepy department-store retailer.

Mr. McDonald gave the green light to the Buytopia promotion shortly after he arrived at the helm last month from a senior position at grocery giant Loblaw Cos. Ltd. "It's a space he's interested in," said Sears spokesman Vincent Power. "They are customers he doesn't want to miss."

Mr. Power said the promotion comes at a critical time, just ahead of the back-to-school shopping season. Sears is racing to lure a younger customer with new clothing lines and an expanded e-commerce business.

But its Buytopia deal, which is valid for 90 days, can only be used in Sears stores – not on its online site – as a way to encourage shoppers to head to the malls during the summer shopping doldrums. Shoppers can use the coupon for anything sold at Sears, although future vouchers will probably be limited to specific categories of goods, Mr. Power said.

He said that while the Buytopia vouchers may encourage customers to wait for more deals, they often do it anyway through other discounts.

Gap, which has struggled amid soft results, has used Groupon coupons at its various chains since last year. "It targeted the lower end of our demographic range," Glenn Murphy, chief executive officer at Gap, said earlier this year. "We go after [an age group] ... between 25 and 30, where our market share is not as strong as it is with the 30- to 35-year-olds. … You're going to see a lot more in 2011 from our marketing teams going after new customers, using new mediums to go after those customers. ... That can be cost effective."