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 just signed up for an account to poke around. On their "create a deal page" they taunt merchants not to goof around with their discounts and to offer 50% or more off. Pretty annoying.

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.