Warren Buffet for Coupon-Clippers

Can a Web site save you 70 percent at the grocery store?

Growing numbers of grocery stores no longer accept coupons printed from Web sites such as www.coolsavings.com due to an epidemic of coupon counterfeiting, the New York Times reported last week. Using a combination of software and laser printers (see this site for an example of how easy it is to make your own bar codes at home), shoppers have been creating fake coupons that they use to get groceries for free. Because stores have no way to know whether a home-printed coupon has been counterfeited, the Times fretted that the fledgling business of “e-couponing” could be strangled in the cradle.

But while the somewhat fanciful vision of a nation of consumers printing their own coupons at home may be doomed, the Internet still has the potential to transform the way people clip coupons. A Web site called the Grocery Game analyzes and shares information about the traditional (in a previous age, we’d call them “dead tree”) coupons that appear in the Sunday papers. And by using that information, shoppers can deduce what coupons are offering the best deals. It appears that the Internet will change coupons the same way it’s changed any number of things: by marrying collective intelligence with the power of the Net to centralize and distribute information. In the same way that readers review books on Amazon, buyers rate sellers on eBay, or friends validate friends on Friendster, grocery-shoppers are starting to use the Internet to evaluate coupons and to share their knowledge with each other.

The Grocery Game identifies individual supermarkets by ZIP code, examines local newspaper inserts each week, and determines whether each coupon in the insert offers a “rock bottom sale” (buy now!) or a mere “phantom sale” (don’t buy; it’s a coupon that, based on historical precedent, is not as low as what will be offered in the near future). The information is collected online in what’s known as “Teri’$ $hopping Li$t,” after the Grocery Game’s founder, Teri Gault. The site charges its customers $10 for eight weeks of the shopping list, targeted to their local supermarket, and according to the company, 14,000 people are paying up.

When Gault began her coupon analysis in the early 1980s, her motivation was poverty. She became an arbitrageur of the coupon world, meticulously tracking sales on index cards for supermarkets in Southern California, where she lives, and then making “buy” recommendations for herself based on historical pricing trends. By weeding out “phantom sale” coupons and using only “rock bottom sale” ones, she claims to have successfully budgeted $35 a week to feed her household. In late 1999, her husband had the idea of taking her coupon archive online for sale to subscribers, and she began publishing it in February 2000. Now she franchises the business across the country, with six franchisees covering supermarkets in 22 states, she says. (Also, Gault no longer wanders through supermarkets in Los Angeles, tracking deals. Her staff does it for her.)

Gault claims her shoppers can save around 70 percent each time they shop. The key to reaching this level of savings, however, is scrupulous adherence to Gault’s philosophy of “stockpiling.” The premise is that for the first 12 weeks of shopping using the Grocery Game, you purchase a surplus of the products that are at “rock bottom” prices. Once the stockpile is built, then you replenish opportunistically, limiting yourself to the best sales.

The Internet serves as the Grocery Game’s information marketplace—a nationwide network of coupon data—and it also provides a forum for real-time discussions by subscribers, who share tips on how best to use that week’s information. Without the Internet, Gault wouldn’t be able to track new deals for the week, sort the coupons into “buy” or “ignore” recommendations, and then get them in the hands of shoppers in time for that week’s grocery purchases.

For now, 14,000 Grocery Game subscribers can do little to change the market dynamics of couponing in America. But in the mature end-state of a collaboratively filtered, “smart mob” nation of coupon-clipping shoppers, you could see the coupon business change dramatically. Companies might see less reason to distribute lackluster “phantom sale” coupons, as they will be immediately revealed as unworthy of redemption. Like the Bloomberg information terminal, which gave bond traders easily accessible historical data on bond prices, or Web sites such as Expedia, which took airline-ticket pricing and made it widely available to the public, the Grocery Game could help consumers by creating more accessible, transparent information about grocery-store prices.

When it comes to consumer services, Internet companies can be divided into two broad categories: those with gee-whiz technology that isn’t necessarily useful, and simple ideas that help people to better accomplish an existing task. The latter have fared better than the former. The Grocery Game may be less technologically impressive than personalized coupons printed from your e-mail inbox, but its impact may prove more enduring. Teri Gault took the idea of an informal shopping club—common among die-hard coupon-clippers—and recreated it online. But where a real-world club can’t have more than a dozen or so members before it becomes unwieldy, Gault’s online club faces no such limitations.