Why Small Business Accept Many Discounts to Stay Alive: The Deal Platform Economics

To many consumers, online deal platforms such as Wowcher and many others appear to be simple marketplaces for bargains. They offer discounted meals, spa treatments, travel packages, and entertainment experiences at prices that often seem surprisingly low. Yet behind these offers lies a complex financial reality: for many small businesses, such discounts are not primarily about marketing or customer attraction. They are about cashflow survival.

Small businesses frequently operate with limited financial buffers. Unlike large corporations, they often lack substantial reserves, access to low-cost financing, or predictable revenue streams. Seasonal fluctuations, unexpected expenses, or periods of low customer demand can quickly create cashflow pressures. In these situations, the immediate availability of cash can become more important than long-term profitability.

Deal platforms address this need by aggregating demand and providing businesses with upfront payments in exchange for heavily discounted offers. Instead of waiting for customers to arrive organically over time, a restaurant, spa, or activity provider can secure a sudden influx of bookings through a single promotion. This immediate injection of revenue can help businesses cover fixed costs such as rent, wages, and utilities during financially strained periods.

The economics of these arrangements often involve significant trade-offs. Businesses typically offer steep discounts to attract consumers, while the platform takes a commission from each transaction. As a result, the profit margin on individual deals may be minimal or even negative. However, for many small businesses, the primary objective is not to generate profit from the promotion itself but to stabilise cashflow and maintain operational continuity.

This dynamic is particularly evident in industries with high levels of unused capacity. Restaurants with empty tables, spas with unbooked appointment slots, and leisure venues with unsold tickets face a common challenge: once a service opportunity passes unused, its revenue potential is permanently lost. Deal platforms allow businesses to monetise this surplus capacity, converting otherwise idle resources into immediate income.

For some businesses, deal promotions also function as short-term marketing tools. By attracting new customers at discounted prices, companies hope to generate repeat visits at full price. However, this outcome is not guaranteed. Many customers who purchase discounted offers are primarily motivated by price rather than loyalty. They may move from one deal to another without developing long-term relationships with individual businesses.

The reliance on discount platforms can also create structural dependencies. Businesses that repeatedly use these channels may find themselves caught in cycles of continuous discounting. Regular customers may begin to expect promotions rather than paying standard prices, weakening the company’s ability to maintain consistent revenue streams. Over time, this can erode brand perception and reduce pricing power.

Despite these risks, the role of deal platforms as cashflow stabilisers remains significant. In times of economic uncertainty or reduced consumer spending, they provide a mechanism for small businesses to access liquidity quickly. By trading future revenue potential for immediate financial relief, companies can navigate short-term challenges and maintain operational stability.

This model reflects a broader principle within business systems: cashflow often determines survival more than profitability. A company can remain profitable on paper yet still fail if it cannot meet immediate financial obligations. Deal platforms, in this context, serve as informal financing tools, enabling businesses to convert future service capacity into present-day cash.

Understanding this dynamic reveals why steep discounts are often less about consumer generosity and more about financial necessity. For many small businesses, participating in deal platforms represents a strategic decision to prioritise liquidity over margin. What appears to consumers as an opportunity to save money may, for the business, be a calculated response to urgent economic pressures.

Ultimately, the widespread use of deal platforms highlights the fragile financial realities faced by many small enterprises. It illustrates how market structures can evolve to address cashflow challenges and how businesses may accept significant trade-offs in pursuit of short-term stability. Behind every heavily discounted offer lies a complex balancing act between survival, growth, and long-term sustainability.