Do Groupon Deals Actually Help Local Businesses or Hurt Profits?

When Groupon emerged, it promised small businesses a surge of new customers through attractive deals.

 

For establishments like restaurants, salons, and fitness studios, offering significant discounts appeared to be a straightforward strategy to increase foot traffic and build customer loyalty.

 

However, by 2025, the question persists: do these deals genuinely benefit small businesses, or do they erode profits?

 

The Catch with Deep Discounts

 

Groupon's model often requires businesses to offer services at a 50% discount or more.

 

Additionally, Groupon takes a substantial portion of each sale.

 

For instance, a $100 service might net the business only $25 after discounts and fees.

 

While this approach can drive volume, it frequently undermines profit margins.

 

Short-Term Gains, Long-Term Losses

 

Some businesses experience an initial influx of new customers, but many do not return once the deal concludes.

 

Moreover, regular customers may opt for discounted purchases, reducing existing revenue.

 

Case studies have shown that restaurants, for example, have lost money on every Groupon sold, leading to financial strain rather than growth.

 

When Groupon Works

 

That said, Groupon isn't always detrimental.

 

Businesses with low variable costs—such as fitness classes or tours—can benefit by filling otherwise empty slots.

 

For these companies, the real value lies in the potential to upsell or convert new visitors into long-term loyal customers.

 

Smarter Discounting Strategies

 

Instead of allocating profits to Groupon, many small businesses now run promotions through their own websites, loyalty apps, or email campaigns.

 

This approach allows them to retain more revenue and maintain control over the customer relationship while still offering attractive deals.

 

Call to Action

 

Before launching a Groupon deal, carefully assess your profit margins, set clear objectives, and explore alternative strategies that foster customer loyalty without compromising profits.