Forecast: Consumer Daily Deals Spending to Reach $5.5 Billion by 2016

A new BIA/Kelsey forecast projects rapid growth for the online daily deals space this year, with an 87% increase in consumer spending on deals over 2011. The report says consumer deals spending will reach $3.6 billion in 2012, when slower growth will become the norm. BIA/Kelsey projects a still substantial 23% spending increase in 2013 before more modest increases bring consumer spending to $5.5 billion by 2016.

“After astronomical growth in 2012, the online deals marketplace is showing signs of maturity,” said Peter Krasilovsky, vice president and program director with BIA/Kelsey, in a press release. The decline in revenue growth notwithstanding, the forecast offers a big thumbs up for deals providers: a majority, albeit a slim one, of small business owners say they are likely to run a daily deal within the next six months, according to BIA/Kelsey’s Local Commerce Monitor. 11% are “extremely likely,” 15% “very likely” and 24.3% “somewhat likely,” whereas 26% are “not at all likely.”

The forecast echoes the merchant confidence seen in a July study released by Utpal Dholakia, a professor of management at Rice University, where 62% of the 641 small businesses surveyed said they profited on a daily deal, representing a 6% increase over spring 2011. This comes as many experts and merchants openly question whether daily deals facilitate repeat customers; a July study conducted by digital SMB marketer Constant Contact and research firm Chadwick Martin Bailey reported 58 percent of its 1,433 respondents did not automatically equate a positive daily deals experience with customer loyalty.

The report also forecasts a broader evolution of the digital deals space. “We’re leaving phase one, in which deals companies basically sent out sharply discounted deals to large mailing lists,” said Krasilovsky in a follow-up email. “Deals companies are now beginning to also focus on the merchant relationship, offering them a variety of business services, from reporting and payment processing to loyalty programs and continuous, instant deals.”

Deals giants Groupon and LivingSocial are invested in many of these services, Krasilovsky says, but they may not yet be reflected in their bottom lines. Last year, Groupon, which has seen its share price plummet to around $5 in the 10 months since its IPO, introduced Groupon Rewards, a rewards program that tracks a consumer’s credit or debit card and offers a merchant-specified rewards voucher once a particular spending target is reached, and Groupon Now!, a real-time, location-based deals service.

The online deals industry’s progression, the forecast speculates, could mean bigger players, such as American Express, Bank of America, Google, Amazon, Facebook and eBay, with access to particular targeting data might become increasingly involved in the space.

Patrick Duprey is an editorial assistant with Street Fight.