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) --


impending IPO could be a boon for the merchants that offer their discounts to the daily-deals site.

Sucharita Mulpuru, principal analyst at Forrester Research, said that with Groupon's financials coming to the public eye, the company will "be forced to grow very aggressively."

That will ultimately lead to more aggressive deals, with more favorable terms given to merchants, she said.

>> Groupon IPO: Customers Will Benefit

For Groupon, that means costs and marketing expenditures will increase, further pressuring its margins.

For the merchants that work with Groupon, it could mean better terms and less risk of offering deals that are loss-leaders.

A number of Groupon's partner-merchants have complained publicly about deals being oversold, and then having to manage hoards of one-time customers who cash in on the discount and are never seen again.

A recent deal offered with restaurant chain


signals that Groupon -- and merchants -- may be smartening up, evolving to find concrete ways of keeping would-be one-time customers coming back -- and paying full price the next time they walk in the door.

To get the Quizno's deal, consumers paid $26 for a punch card worth eight regular-size sub sandwiches, valued at up to $51.92. By its nature the deal was designed to create repeat business, stipulating that punch-card holders come back to the same Quizno's location for all eight sandwiches.

Groupon, leader in the crowded daily deals space, filed its IPO paperwork Thursday.

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The deal drew upwards of 50,000 customers, but BIA/Kelsey analyst Peter Krasilovsky told


he didn't think it was particularly successful. "They need to keep working on it. It wasn't a flop. It wasn't great."

By comparison, Groupon's offer with retail chain


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last year drew more than 400,000 buyers. Rival

Living Social's

deal for an

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gift card brought in 1.4 million takers.

>> Groupon: Will It Commoditize Retail?

Even so, the evolved nature of the deal -- bringing buyers back for multiple purchases, rather than coming in for one-time discounted purchases -- highlighted one way Groupon and its merchant-partners can innovate the business model and move it forward.

"The idea is to see more experimentation" with the way deals are structured, Krasilovsky said.

The deal also demonstrated Groupon's unique capability of reaching advertising audiences some retailers rarely reach. For Quizno's, that meant getting its branded deal in front of educated women -- Groupon's majority customer base, according to Krasilovsky -- as opposed to young men, the sandwich chain's typical demographic.

New targeted verticals represent another growth area for Groupon, Krasilovsky added, such as Home and Garden deals, which offers relevant deals for the home, Getaways, a partnership between Groupon and travel e-giant


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, and Groupon Now!, a hyper-local service where customers punch in their zip code and are offered ready-to-use discounts on products and services in their immediate area.

Groupon's margins have been changing over time in the fast-evolving daily-deals market where the company typically takes 30% to 50% commissions on the deals it sells, Krasilovsky said.

With increasing competition in the market from rival firms like

Living Social







, the deal-a-day sites need to offer consumers deeper and deeper discounts to keep them coming back. That will contribute to Groupon needing to accept slimmer margins.

"People used to be happy with 50% discounts," Krasilovsky said. "Now they expect more 60% and 70% discounts. Groupon must be willing to eat that money just to keep that volume."


Written by Miriam Marcus Reimer in New York


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