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Daily deal sites, although attractive, have been showing signs of possible decline. People’s love for deals, which has made this market saturated with businesses old and new, trying to get their foot into this expanding industry.
There has been some speculation on the industry’s success and what the future looks like for it. Bloomberg reports show that more daily deal services were closing down as opposed to opening. In July, 38 daily deal sites closed down while only 36 opened up. During this time the industry also encountered a 7 percent drop in revenue.
A study done by Rice University shows that only 56 percent of businesses are making profit from deals, while 26.6 percent lost money and 17.9 percent broke even on their promotions. Findings also show that only roughly 20% of customers are returning to these businesses for full price purchases.
Groupon posted that they have lost $103 million in the second quarter. One of the problems that Groupon faces is that people purchase deals offered on their site only to never use it. It then expires and money is returned back to the customer.
Another sign was a Facebook announcement on August 26, in which it disclosed that the networking website will be discontinuing its special deals program. Facebook felt that it should abandon the idea of Facebook deals, which was only available in Atlanta, Austin, Dallas, San Diego and San Francisco.
Greg Sterling, an analyst at Opus Research Inc. in San Francisco suggests that the competition may have been too intense for Facebook. They will continue to offer existing services and check in deals will still be available for users.
Following Facebook, Yelp, a website that reviews local businesses, have decided to cut down on the number of staff members working on the deals offered on their website.
Half of the employees are now cut from the team. Groupon CEO, Andrew Mason, announced to employees regarding Yelp, “Yelp is small and is not growing. In the 15 markets where we compete, our daily deals are 500 percent of their size.”
With all this happening, Groupon and Living Social continue to remain the leading daily deal sites in the industry.