Quote:
Originally Posted by KlenTelaris
Aha so it's basically form of advertising.
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Yes, generally considered a loss leader to attract new customers. However, depending on the creativity of the deal and its pricing, I've seen instances where I knew the merchant was still going to clear a profit even though they are basically offering their service or product for only 25 cents on the dollar.
There's a couple variables that also come into play that benefit the merchant, generally only 70-80% of the deal vouchers are actually redeemed, meaning the merchant was able to collect money without ever encountering an offsetting expense. Also, the merchant gets a nice chunk of money all up front after Groupon takes their commission. Since many of these deals don't expire for a year, a cash strapped merchant is instantly able to get a nice infusion of cash to operate their biz while deferring their expenses until the vouchers are redeemed.
I do fear though that its only a matter of time before an unscrupulous merchant uses Groupon to run a scam, by issuing an incredible deal, pocketing the cash and then closing their doors.