This is a nice statement to make, but how do you propose they could have done that?

Groupon seems to demand at least a 50% discount on normal prices, and then seems to want to take between 50 and 100% of the actual groupon coupon cost. That leaves the merchant able to collect somewhere between 0 and 25% of their standard pricing. Other than software businesses, there are few few shops that have enough of a markup to be able to sell something at 25% of face value and still make money on the product itself, much less cover all the additional overhead.

Well then, I guess they shouldn't have used groupon, if groupon is only good for drawing in customers by extreme loss-making activities.

Bashing your head against a brick wall hurts, but the solution isn't to find the least painful brick, it's to stop bashing.

Merchants run promotions at losses all the time. What the merchant should have done was set a cap at the dollar value of the loss they were willing to accept. For example, I'm willing to lose $2000 therefore I will sell only 200 groupons.