Groupon does a couple of remarkable things.
First off, Groupon adds e-commerce to small businesses that can’t do so. You don’t need to install anything (though online booking can help you deal with the onslaught of new business), you don’t need to purchase an https cetificate, you don’t need to sign up for a merchant paypal account. So, that’s actually a pretty huge deal for a lot of businesses.
But this is what it really does: it sells advertising. It signs up however many pairs of eyeballs, probably at least 10,000 in a new city, and then it gives one (!) business all those eyeballs for one day. As a business owner, this is great. I mean, not only do you get to sell stuff online (if you didn’t already), but it’s also as if you’ve had a giant spotlight turned onto your business. All kinds of people that have never heard of you are suddenly lining up to buy your product at a deep discount.
But of course, the question a lot of people are asking is, what are return visitors like? Are you selling your product at 25% of the normal price (you generally need to discount your service at half it’s normal cost, and then Groupon takes half of what is left) for one-off sales or are you creating any loyalty? I would think you’re getting an audition which could turn into repeat visits, but in reality, I think Groupon is the only one getting any real loyalty out of this deal.