August 30, 2011, 1:36 PM — With Facebook closing its Deals operation, Yelp scaling back its daily-deal offerings and Groupon continuing to face hard questions about its growth and operating losses, it's fair to wonder whether the online discount-site craze has plateaued.
Indeed, recent market metrics indicate the online daily-deal industry has reached a tipping point. Bloomberg cites statistics from daily-deal aggregator Yipit showing that more daily-deal sites closed (38) in July in than opened (36) and that daily-deal revenue in North American markets was down 7% from June.
Maybe those are just blips, but one gets the sense that "deal fatigue" is setting in for both customers and businesses.
As hundreds of companies jump into the online-coupon market, consumers and merchants may have begun to grow weary of offers. At the same time, increasing competition among websites threatens to squeeze margins, making it harder for them to earn a profit from the deals.
Many consumers suffer from daily-deal overdose. A May survey by deal site PriceGrabber found that 52% of U.S. consumers who use daily deal webites "expressed feeling overwhelmed by the number of bargain-boasting emails they receive on a daily basis."
What that means, of course, is that consumers begin filtering out deals, which results in less revenue for the daily-deal sites as well as the businesses running the special offers.
And even when customers take advantage of a daily deal, they are often dissatisfied with the experience, as Time.com's Brad Tuttle notes:
More than 1 in 5 daily deal vouchers are never used. Increasingly, customers who do redeem them complain of pushy upselling, tricky fine print, or that the service or product was a poor value or just plain bad, no matter how big the discount.
Clearly daily deals are at or approaching a saturation point, at least in mature markets. Yipit's July numbers on daily deal sites indicate the market is entering the shake-out phase. What happens after that will be interesting.