By Luanne Teoh on 09-26-2011

Have you ever opened up your inbox and found at least 5 to 10 different daily deal offers? — and then did absolutely nothing about them — In fact, you didn’t even bother opening up the emails to check them out.

If that sounds like you, then you may be suffering from Daily Deal Fatigue Syndrome like many of us.

However, according to research firm BIA/Kelsey who believes that “consumer spending on deals in the U.S. will hit $2 billion, up from its previous forecast of $1.2 billion. In a release, the research firm said the growth is being fueled by a larger number of registered users who are actively buying deals, better targeting capabilities and new niches in the space, including flash sales sites, which offer deals on apparel and other categories for a limited time via email.”

On the flip side, according to Yipit, the daily deal industry revenue is showing the opposite trend. Yipit, a daily deal aggregator site and market watcher is showing that revenue for the industry fell from June to July according to the chart below. 52 percent, of U.S. consumers who use daily-deal services say they feel ‘overwhelmed’ by the number of e-mails they receive about deals on a daily basis, according to a survey conducted earlier this year by PriceGrabber.

In late August, Facebook announced its exit from the daily deals business and so did local content king, Yelp – Yelp’s entry into the daily deals business lasted around a year while Facebook’s foray into it lasted a little over four months.

Despite the conflicting reports of growth and shrinkage, there are a few things that are for certain:

1) The daily deal space is not big enough —  The fact that both Yelp and Facebook came in to compete directly with Groupon and left very shortly after is a sure sign of it. “The big players are exiting because the business is not making a dent in their revenue numbers,” said Sucharita Mulpuru, an analyst at Cambridge, Massachusetts-based Forrester Research Inc. “The space is not as large as everyone thought it was.”

2) Commoditizing and market dominance – According to a research conducted by Lab42, 64% of people are members of Groupon and 49% of people are members of LivingSocial. “While Groupon had first-mover advantage, many competitors followed suit, driving down prices and commoditizing the market,” said Jeremiah Owyang, an analyst at Altimeter Group.

3) Merchants are being burnt out — Through the incessant calling by various daily deals sites. After Kiebpoli Calnek ran a Yelp Deal advertising 50 percent off an aerial performance class in July, she began receiving calls from representatives of Groupon, LivingSocial and other deal sites every day. “They send me e-mails, they call me, they call me again,” said Calnek, who is based in Brooklyn, New York. “I told them, ‘I’m burnt out from this deal. I have 500 new clients. Why would I want to do another one?’”

How does an industry sustain so many players within the same pond? — Something has to give. And it is clear that many virtual doors have closed out of the 600 or so daily deal sites out there (including Facebook and Yelp)

In June, we wrote a blog post and came up with 50 deal sites literally within a matter of minutes.

Here are some recent activity (or inactivity) within the daily deal industry:

• Google recently purchased a German clone of Groupon
• AOL shuts down its daily deal site wow.com in September 2011
• iDineDeals.com – Stopped operations in April 2011
• Go2Moe.com – No deals since April 2011
• TownFav.com – No deals since April 2011
• MyDealHop.com – No deals since April 2011
• OffersUp.com – No deals since May 2011
• Buyzooka.com – No deals since May 2011
• LocalDealFinder.com – No deals since May 2011
• CaptainSave.com – Last known deal was August 2011
• SparkSpree.com – Moved into mobile only as SparkQuest
• rowdclick.com – No deals being offered

One thing for sure as the daily deals industry progresses, only the strong will survive — and this means closures, consolidation, buyouts, mergers and acquisitions.

Graph courtesy of Yipit

Data and information courtesy of localdealsites and Lab42

About Luanne Teoh

Luanne is a senior correspondent for BizTechDay focused on Small Business Tech, Mobile and China based in San Francisco. In the last 17 years, she has helped launch start-ups and turned around failing operations. Her international work experience include both public and private corporations in Southeast Asia, Australia and North America. She has previously worked for Oracle Corporation, SonyBMG Music, Universal Music, Catcha Media and SOH Inc. Apart from a keen interest in technology, Luanne is also and avid explorer of the globe, cultures and people.

2 Responses to “52% of Consumers Sick Of Daily Deals. Merchants are Burnt Out. Are Daily Deals Businesses Dying?”

1. Howard Greenstein Says:
   October 4th, 2011 at 5:30 pm

   One down month doesn’t make a trend. Is it possible that with the Congress/Economy stalemate people were keeping their wallets shut? How does this compare to overall retail sales in this period?
   I’m not saying the deal space is in good shape, but I am suspicious of the conclusions you’ve drawn from this data.

2. Sandra Rand Says:
   October 5th, 2011 at 8:41 am

   Your last sentence summed it up – the future of the deals industry is in consolidation, and I’d add on the power of list segmentation. The industry will have to start drilling down to offer targeted, relevant deals to their subscribers. Geography is not the only segmentation that applies to me as a consumer.

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