US consumers to spend US$4.2bn on deals by 2015
Increase in US Consumer Spending on Deals
US consumer spending on deals including daily deals, instant deals and flash sales is set to increase from US$873m in 2010 to US$4.2bn in 2015, according to a new forecast from BIA/Kelsey.
In March, the company had anticipated that deals spending would increase to US$3.9bn by 2015. It said its update indicates only a slight increase overall by 2015. However, revenues for 2011 have been revised significantly to US$2bn from the US$1.2bn originally estimated in March.
“Even as more consumers sign up for deals programmes and awareness grows and new markets are entered, we see a ceiling on how many deals consumers will buy, and their overall interest level in deals,” said Mark Fratrik, BIA/Kelsey vice president and chief economist.
“With that said, a strong foundation has already been created in the promotional ecosystem of this young industry. We believe daily deals reinforce other advertising and that related services, like instant deals and flash sales, will significantly boost income for key players.”
Factors Influencing the Revised Forecast
One of the factors affecting the revised forecast is a bigger increase in the number of registrants for deals services. The company said market leaders Groupon and LivingSocial have expanded quickly and many more participants have entered this arena, including vertical sites and local media companies (either in cooperation with one of those two sites or through white-label firms).
Another factor has been growth in the number of registered users who are ‘active’, or buying coupons.
Expected Trends in the Deals Market
In addition, BIA/Kelsey said greater specialisation of deals sites (both vertically and by neighbourhood), better targeting capabilities and continued marketing of these services will lead to more activity by registered users.
The company says there will also be an increase in the average number of transactions, resulting from more efficient providers of these services and expansion of the types of products and services being offered. And there will be a rise in the average price per transaction, owing to general inflation and the attempt by some providers to offer more valued services at higher margins.
Opportunities for Local Media Companies
BIA/Kelsey said Groupon and LivingSocial continue to lead a growing marketplace of 600-plus players, which include destination sites, white-label providers working with local media such as directory companies, newspapers, and radio and television operators; vertical players; mobile/location-based providers; flash sales sites; exchanges; and aggregators.
“It’s worth noting that the deals market continues to grow, despite the recent departure of Facebook and others that may not have been well-equipped to invest the time and money necessary to participate in such a crowded market,” said Peter Krasilovsky, vice president and program director, Marketplaces, BIA/Kelsey. “We expect to see local media companies leverage their existing promotional, sales and other local assets to play a significant role in this industry, alongside today’s deals leaders Groupon and LivingSocial.”
Grainne Rothery