Groupon’s woes go on as growth drop predicted

ONLINE daily deals websites are seeing growth bottom out as businesses lose interest in offering heavy discounts on websites such as Groupon, data revealed yesterday.

Research from American marketing firm BIA/Kelsey showed that growth in consumer spending on daily discount deals in the US will drop from 87 per cent this year to 23 per cent in 2013 before reaching single digits in the following years.

The news comes at a worrying time for the world’s biggest daily deal firm, Groupon, which launched a highly publicised initial public offering (IPO) last November but has seen its share price plummet as it fails to sustain its rising revenues.

Groupon’s sales grew just 1.6 per cent on the previous quarter in the three months to July, compared with 13.6 per cent quarterly growth in the preceding three months. The share price, which has fallen more than 80 per cent since last November’s IPO, dropped another seven per cent yesterday.

“Deal conversion rates may be suffering due to over-familiarity and the market may be near saturation. After astronomical growth in 2012, the online deals marketplace is showing signs of maturity,” BIA/Kelsey’s vice president Peter Krasilovsky said. The research also shows that around half of small businesses surveyed in the US would be unlikely to participate in daily deal schemes, while 26 per cent would be likely or very likely to offer discounts to Groupon.

BIA/Kelsey said the data showed the importance of daily deals firms such as Groupon and its biggest competitor LivingSocial diversifying their business models, including entering loyalty schemes and takeaway food offers.

The marketing firm said that while US consumer spending on daily deals would hit $5.5bn (£3.4bn) by 2016, it would become an increasingly small part of discount firms’ revenues.