Groupon's critics – which had been growing almost exponentially in recent weeks – were silenced on Friday by its wildly successful IPO. However, that doesn’t mean the company’s weaknesses have vanished. Observers expect Groupon to be facing significant headwinds from other competition, and from a growing sense of deal fatigue from consumers.
A new report to be released by Forrester Research and reported in the Wall Street Journal not only supports this dim view but predicts the eventual demise of the daily deal industry.
The survey found that survey many people who take the offers from sites such as Groupon, LivingSocial and Gilt would have purchased those goods or services at full price anyway. Eventually merchants will come to this conclusion as well and stop participating.
Still Much Growth to be Realized
That day, however, appears to be a long way off, with many analysts expecting the market to grow far beyond its current multi million dollar size. The category has been so popular it gave a tremendous boost to local search - so much so that it skewed pricing in some markets. BIA/Kelsey is predicting the daily deal market will reach $2 billion this year — from $873 million in 2010. In 2015, the daily industry will be sized at $4.2 billion for a 36.7% CAGR, the firm reports.