To me, I never undertood all of the hype behind groupon.  I get the business model and how it is supposed to bring more customers to a small business. After reading this post from Jesse the passage that stood out to me was this:

After three months of Groupons coming through the door, I started to see the results really hurting us financially. There came a time when we literally could not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign. We literally had to take $8,000 out of our personal savings to cover payroll and rent that month. It was sickening, especially after our sales had been rising. Sure, maybe thinking of it as just marketing may seem justified, but anyone that knows me well knows that I would never pay more than $100 for advertising, much less $8,000, because I don’t believe that regular advertising had much return on investment at all. So the experience jaded me, and the interactions with the few bad Groupon customers we had jaded our staff. After all of this, I find myself not even willing to buy Groupons because I know how it could hurt a business (side note: service industry businesses do quite well with features like this because it is just the cost of time – you are not paying for a product for resale. Resale, in my opinion, get hit the hardest).

So in short, the more groupons she redeemed the more her business suffered.  I think the concept of Groupon is rather interesting but mostly impossible to pull off for a few reasons:

1. The new customers that come to your business are only there for a discount so it is unlikely they will either come back or buy anything else that is full price.
2. Unless the company redeeming groupons is a big retailer such as a Target or a JCPenney, I find it unlikely that the customer will find something else to buy full price. If the business was a big retailer, then they most likely have the resources to pull off their own promotions.

I think their business model is ultimately doomed to fail as they can only survive by getting new customers and their current customers aren't coming back.