Merchants Can Now Run Their Own Deals On Groupon

I agree with you that this can be a great channel for local businesses who want to sell online.

However, I see a couple of potential issues with this approach.

1) Merchants can offer probably a 5 - 10 % discount (acquisition costs shifted to discounts), but beyond that I doubt if can be sustained. Margins in most local businesses are not that big. So, it'd be hard for a restaurant to do a 50% discounted deal for like a month or so.

2) Another potential problem of this approach - how many users will check each individual merchants store ? People flock to Groupon because there's a new deal every day. Or in other words, the novelty factor keeps things fresh and keeps people coming back. If a merchant is offering the same deal for 6 months via the store, it might not be a big draw for users. This will be completely contrary to the notion of scarcity and novelty that make groupon's a deal a day model so successful.

I run a service based business (computer repair) and that's exactly what I was thinking - I can offer a 50% discount and it's still almost all profit. But I wonder if this is us only or works in other countries (must check), and how many people in my town of 8000 have ever heard of groupon.

What mailing list?

Um it is great that you get access to their massive mailing list and site traffic, but you can't do $10 and you are forgetting about the fees (30-50% of revenue). So you have a $60, selling for $30 * 300 sales = 9,000 (2,700 is kept by them for the 30% fee). You get $6,300 for something that normally makes you $18,000... It is still a great deal because you get 300 new customers who hopefully love the service and return... All companies like this tell the service business to TAKE it out of their marketing budget. Not to consider it as a easy way to make a TON of profit. Many make little to nothing or loose money on the deals. It is advertising to a very captive market that may come again.

This is addressed at the bottom of the linked page:

  What does it cost?
  Groupon Store: There's no upfront cost. For promoted deals you get 70% of each Groupon sold. For non-promoted deals you get 90% of each Groupon.

  Deal of the Day: No upfront fee, you keep 50% of each Groupon sold.

Was it widely known that Groupon's cut on deal of the day is 50%? I thought there was some to-do a few weeks back about them wanting 100% of Groupon proceeds for some cafe.

I'm bullish on the category. Scalable advertising which actually works for small businesses is, and should be, a license to print money. I might grumble at the $1,500 I paid Google this month but if they told me they had $15,000 of traffic on my keywords I'd happily max out my credit card for a few days.

Take a look at the yellow pages: it's unsexy, it works, it is a multi-billion dollar industry.

According to the site, Groupon will take 30% if the deal is promoted (which seems to include email/Facebook/Twitter advertising) and 10% if not. It's not entirely clear if you can pick any deal to be promoted (after approval by them), or if that option will be throttled somewhat.

You can be sure they have tested the concept for a few months now and they have entered enough numbers on excel spreadsheets before launching this. So to answer your question, it will dilute the deal of a the day buzz, but it will increase revenue.

My only guess is that they have so many merchants waiting in the queue that this is an avenue for these merchants to get their deal out.

The only problem is that for the people buying the groupons. I only try to limit myself to 1 a week since that it all that I can afford right now. If more groupons are available, I probably wouldn't buy more unless it was a killer deal.