Fewer online daily deals ahead?

According to a new survey of businesses that have used sites such as Groupon and LivingSocial in the past, only half expect to do so in the next 6 months.

By Giselle Smith Jan 6, 2012 11:57AM

I started purchasing Groupon deals in July 2010 and soon signed up for similar sites -- but dropped all but three within a few months. Most of the offers were for deals I would never buy. And though the biggest daily deal site seemed to carry coupons for better businesses, or at least ones I recognized, even those appeared to be tapering off -- and with them, my purchases.


Now it looks like the pickings could get even slimmer. A new survey of businesses that used daily deal sites to promote their business in the past year indicates that half will not be signing up for such services in the first half of 2012, according to the Los Angeles Times. Post continues below.

Susquehanna Financial Group and Yipit, a daily deal aggregator, attempted to contact 400 businesses but got responses from only a quarter of them. Still, here's what they found:

  • 80% were satisfied with the daily deal experience.
  • 52% would not feature a coupon in the first six months of this year.
  • Nearly 24% said they would feature only one deal in that time period.
  • 45% said they gained customers from working with the deal sites.
  • 10% said the deals contributed to revenue growth.

However, respondents also expressed concerns about heavy discounting (23%) and low repeat rates for deal customers (20%).


Surveyed companies included restaurants (23%) and spa and beauty merchants (22%), which the report (.pdf file) said was similar to Groupon's base of health and beauty (31%) and food and drink (23%).

 

The daily deal model, pioneered by Groupon in November 2008, was followed by a slew of competitors, the largest of which is LivingSocial. Coupon offers, good for a limited time, are sent to subscribers via email and generally include discounts of at least 50%.


Contradictory reports

Other studies have found different rates of satisfaction among the businesses that use daily deal sites.

 

A Rice University study looked at 324 business that offered deals through Groupon, LivingSocial and three other sites between August 2009 and March 2011. Only 55% of businesses reported making a profit on their deal and 26.6% lost money. Almost 80% of coupon users were new customers, and only about 20% returned to pay full price for goods and services.

 

Some customers have complained that when their favorite coffee shop or exercise class offers a daily deal, it's suddenly overrun by newbies, MSN Money said. And merchants have said the discounts are too steep to generate profit, and the hoped-for return customers didn't materialize, according to Reuters.

 

There's also this horror story: A British bakery that offered a 75% discount for a dozen cupcakes through Groupon had to hire temporary staff to fill the orders when 8,500 people purchased the deal, BBC News reported. Need a Cake bakery owner Rachel Brown said the money she lost on the deal wiped out her annual profits.

 

What does the future hold?

Groupon went public with great success Nov. 4, with an initial public offering price of $20, which surged 55% in early trading. The stock soon dropped, with shares valued at $17.93 on Thursday.


Although Groupon grew 6% in November, reporting $154 million in gross billings, the overall daily deal industry grew just 2%, with $273 million gross billings, according to a Yipit report. Earlier, Yipit reported that Groupon's local deals business had declined but that the company showed overall growth due to the success of new products that offer deals on travel, event tickets and consumer products.


Have you purchased daily deals from sites such as Groupon? If so, have you done so recently or do you think you'll keep doing so in the year ahead?


More on MSN Money:

VIDEO ON MSN MONEY

2Comments
Jan 7, 2012 2:02AM
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Of course, the rising popularity of time-sensitive deals like those offered at Printapons has fueled consumers seemingly insatiable appetite for discounts.
Jan 6, 2012 5:02PM
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I've slacked off buying Groupons and other daily deals, because the quality of the deals offered has generally declined. I generally stick to nice restaurants that are in my area. We're trying to cut our eating out expenses anyway (we used to and still mostly cook at home).
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