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Comment by scrape_it | Hacker News Reader

So the retailer is forced to provide a deep discount, even if it forces them to sell at a loss? Who gets the final say here, might we assume Groupon? If so, why would retailers continue to utilize Groupon if it ends up being a net negative operation?

Can you elaborate on why you think its a scam? What did the founders do previously which supports those allegations?

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There are always customer acquisition costs. But you hope you get some combination of repeat customers and the customers who do come end up spending more.

For instance one breakfast place we frequent is always running a $20 worth of food for $10. We always end up spending more. Besides soft drinks have ridiculous margins. Movie theaters make most of their money from concessions, food (movie and dinner type theaters) and the bar.

I see so the primarily utility of Groupon is that businesses can pay for a chance of repeat customers and/or extra spenders? I think the theater is a good example of the latter.

Then the question arises, why can't businesses do this themeselves? Why can't the breakfast place you frequent just advertise $20 worth of food for $10? Why Groupon? Is it because Groupon can send foot traffic on demand for a cut of the sales?

Yes, like Amazon, Groupon has its own traffic which would be hard for a small business to reach otherwise.

I'm sorry, it's been too long since I read about it. It was years ago. Maybe a Rolling Stone story?

To your first question, yes, Gropon decides the price. There are many examples of comapnies who made an offer through Groupon which put them out of business.

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