Groupon, Living Social, And Other Daily Deal Sites Expected To Struggle This Holiday Shopping Season

   on November 16 2012 2:56 PM
Groupon Inc. (Nasdaq:GRPN) saw shares in the company drop by nearly a quarter of their total value Tuesday -- to all time-lows -- after the Chicago-based daily-deals business reported revenue figures that badly missed analyst expectations.
Groupon Inc. (Nasdaq:GRPN) saw shares in the company drop by nearly a quarter of their total value Tuesday -- to all time-lows -- after the Chicago-based daily-deals business reported revenue figures that badly missed analyst expectations. Reuters

If you think daily deals sitess like Groupon and Living Social are hitting it big this holiday shopping season, you may want to think again.

 

According to Time.com, small businesses are turning away from e-coupon sites and favoring their own marketing strategies, especially during heavy gift buying periods.

 

The data against daily deals sites is mounting.

 

The listing service Manta recently conducted a survey that found 82 percent of businesses said they “have not, and will not, run promotions with Groupon or other ‘daily deal’ sites this year.”

 

Likewise, Reuters polled small businesses and discovered that a high rate were walking away from potential partnerships with coupon sites. The companies claimed the online sites made them pay expensive commissions in return for few repeat customers.

 

Furthermore, 32 percent of merchants in a Raymond James survey reported that they lost money when during online coupon promotions, while another 39 percent said Groupon offers were less effective than their own forms of marketing.

 

This holiday season, instead of using daily deals sites, Time expects consumers to unleash more “showrooming” purchasing tactics—where buyers use their smartphones to price-match and search for the best bargains.

 

During the 2011 Christmas shopping surge, online flash deals only represented 1 percent of total holiday sales, according to The Washington Post.

 

While the case against e-couponing builds, some deal companies are tailoring their model to the changing consumer and the way they spend during the holidays.

 

“Due to industry growth and a greater emphasis on gifts, we expect holiday daily deals to reach at least $150 million in sales this year in North America,” Sean Spielberg, an analyst for daily deal aggregator Yipit, told Time. “This represents significant growth from 2011, when holiday deals accounted for roughly $100 million in sales.”

 

To climb into the holiday buying game, Groupon is releasing a Goods Wish Book and gussying up its toy deals. On the other side, Living Social will debut a holiday gift guide.

 

Still, analysts aren't expecting record-breaking sales from daily deals sites this winter.

 

“In the past year, both Groupon and Living Social have purportedly fallen out of favor with retailers large and small,” said Dan de Grandpre, CEO of Dealnews. “I would guess that you’re more likely to see weaker deals than last year from both daily deal sites.” 

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