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Two more problems with the model:

1) Groupon taks a large cut on top of the big discount. It used to be that GroupOn wanted a 50% discount and then 50% of the revenue. This is like running a 75% off sale.

2) The customers are poorly-qualified leads. All we know is that they are local and like a good deal. That doesn't give the retailer much indication that they would be a good customer (and I think we have seen that they aren't).

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I'm guessing that some of the "new customers" that Groupon delivers are customers you don't want.

I remember my girlfriend many years ago working in a restaurant that offered a ‘kids eat free’ deal one night a week. People would come in with their kids and their neighbors’ kids, order one burger and let the restaurant feed a bunch of kids for nothing. Obviously the restaurant needed to put some terms around the deal, which they later did, but some people are just a blight on humanity in this way.

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