[bitsm]

Your last point is the rub -- Groupon's creating a "heavy discount" mindset with consumers that often transcends product loyalty.

Groupon's focus is local service businesses, which, if they're smart, can offset the initial discount with upsells (think liquor in a restaurant).

For more commodity type products, there's limited upsell opportunity, so you're very vulnerable to price sensitivity. And price sensitivity, as you point out, will increase if the market is saturated in deals.

It will be interesting to revisit this in a year or so, as the economy turns around, and see if Groupon and others have had to change tactics.