A lot of small businesses have cash flow issues. Daily deals sites propose to give extra liquidity in exchange for something your business is already offering. Seems like a great deal until you realize that the fees are egregious. And daily deal site fees ARE just as egregious, but they do a better job of marketing themselves/their fees.
Running a daily deal is great for a lot of businesses, but in many cases the cost to the business is much, much higher than advertised.
That's my current pessimistic view at least.
Meanwhile I get to know a new place, and the server gets a $4-5 tip. That doesn't really seem to bad for the local merchant who otherwise would never have grabbed my attention. I bet the salons and day spas that make up most of the offers (restaurants are second) have ways to up-sell and do even better.
I also wonder if other grouponers are, being mostly new customers, also coming at low demand times. If you come for a discount at the peak hour, that would be bad.
Oh, Phil Greenspun has written on his blog about good experiences selling through Groupon. http://blogs.law.harvard.edu/philg/2010/03/19/groupon-market...
Bad for those who were already profitable and could not make much out of the deals. Not for those who were alienated in some part of the city and got the kick-start just because of deals.
While the link posted by author http://blog.agrawals.org/2011/06/06/best-practices-for-busin... gives some great advice, the allegation on Google asking the merchants to tell their customers about 'Google offer' more and more does sound true.How does the advice for posting lots and lots of photos and a blog post relate to telling your existing customers about 'Google offers'!
I've only come across a few "horror" stories so far.
Groupon wants you to give them your product for 75% off, they sell that product for 50% off and keep 50% of the revenue.
Its fucking retarded. My friends in SF that own lots of businesses refuse to work with groupon - its a horrible deal.
a) The customers sign up for those offers for free, and can buy certain things for less than the normal price.
b) The business owners will lose a percentage of a sale (they might have never made) and in exchange get new customers to check out their place (who, if they like it, will come eat there again.)
Instead of spending money on advertising, this is a pretty sure way to get people visit your restaurant.
c) The "coordinator" gets a cut.
So, ideally, it's really a win-win situation for everyone involved.
Also, I don't think it helps to dismiss the whole idea up front as "its fucking retarded."
(FWIW, I disagree with this, but I think it's what the article is trying to say. My thought on this is, "if the only way to get someone to come to your business is to give them free stuff, what's the point?")