Daily deals portals face survival of the fittest crunch time
The rise of daily deals aggregator Web sites is helping bargain hunters find sweet deals online, but the outlook for many of those sites will sour over the next year, analysts warn.
Inspired by the massive crop of group buying sites, such as Groupon and LivingSocial, some sites are grouping those daily deals together to offer discount deals on various goods and services ranging from restaurant meals to spa getaways in one place. The deals are usually available for a limited time and are not “unlocked” unless a certain number of consumers signal their intention to buy the item or service at the discounted price. Once the threshold of potential buyers is reached online, the deal is activated and made available to all shoppers who signed up for it.
“Will all of these aggregator sites survive? The answer is no,” says Albert Bitton, a principal and managing partner at Group Buying Canada.
“I’ve already seen the growth stop on the aggregator side and the reason is that they’re not making money,” says Bitton, who provides consulting and analysis to the sector from his Montreal office.
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The craze began when Chicago-based Groupon, owned by ThePoint Inc., hit the Web in 2008. With 2010 revenue estimated at up to $350 million and worldwide subscribers expected to hit 100 million this year, Groupon reportedly rebuffed a $6 billion takeover offer from Google last November and is now planning an IPO in the first quarter of next year using the ticker symbol GRPN.
Aggregator sites started popping up last year. They list discount deals from several group buying sites all on one site, acting as online clearing houses to help consumers sift through offers from several discount sites at once.
There are about 60 aggregator sites in Canada today, but that’s just too many to survive in a crowded online marketplace serving Canada’s small population, Bitton predicts.
“(Sixty sites) is ridiculous. There are more here than in the U.S. on a per capita basis,” Bitton says. “The (Canadian) aggregator sites don’t have enough members and traffic to justify building a business model, especially when there’s over 50 of them across the country.”
“The (North American) market could probably support a few dozen of these sites versus hundreds,” says Greg Stirling, senior Internet analyst at Opus Research in San Francisco. “There will be some consolidation. We may see some mergers of smaller sites to combine efforts.”
There are about 400 group buying sites in North America, Stirling says. Bitton estimates the number of Canadian sites at around 120 and says it could hit 200 in the next nine months.
Many actual group buying sites may merge, Bitton says, but he believes with aggregator sites “mergers won’t happen, the sites will just disappear.”