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Nearly 40% of daily deals subscribers have never made a purchase
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Nearly 40% of daily deals subscribers have never made a purchase from a group-buying site such as Groupon, while just 26% have bought more than four coupons, according to a new report from Forrester. The findings will cast a shadow over the success of firms such as Groupon just days after its USD700m IPO. With nearly 30% of those polled between June 11 and June 21 saying that they have unsubscribed to avoid irritating deals emails that are at the core of Groupon's offers service, the figures add to growing doubt over the firm's long-term business model, despite notching up a USD12.7bn valuation in its public launch.
While the daily deals market continues to see huge growth, the Forrester figures echo earlier reports that that the market may already be reaching saturation point as consumers begin to tire of the service. This is underpinned by a recent Yipit report claiming that billings per individual Groupon subscriber fell 22% between Q2 and Q3 this year, as interest begins to wane.
Having negotiated one of the most hotly-tipped IPOs of the year, Groupon's real challenge will be to prove to its backers that its valuation is not merely hot air from an over-hyped market. Forrester, however, claims that there is limited space for growth in key offers segments, such as restaurants and retail, because most of the subscribers who buy offers from a particular brand are already customers of that brand. With 80% of clothing and shoe customers falling into this category and more than half claiming they would have bought the product without a Groupon offer, the figures cast doubt on Groupon's relevance in these sectors.
Forrester also claims that "email won't drive growth moving forward", suggesting that an inbox-based marketing strategy is actually starting to repel customers and will be expensive to scale. Some 49% of those polled say that they will not sign up to daily deals because they don't want cluttered inboxes. With 83% of Groupon's customers receiving offers by email and 49% of LivingSocial's subscribers doing the same, the figures raise serious questions over this sales strategy. While this suggests that the firms' marketing technique has ultimately backfired, Forrester claims that organic word-of-mouth traffic is also be effective, "so long as a daily deal company can continue to keep its brand top-of-mind for consumers".
"Net-net Groupon will stick around and eventually get to profitability. It'll get there with far less interesting deals for shoppers and probably a smaller company," says Forrester analyst Sucharita Mulpuru.
Despite this, daily deals continues to attract huge amounts of capital with daily deals revenues in the US market up 12% to USD266.6m in September, from USD237.8m in the previous month, according to estimates from deals aggregator Yipit.
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