September 26, 2012, 11:37 AM

Daily deals are big business for online merchants

But over-saturation will reduce the  growth rate, a report says.

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Consumers will spend $5.5 billion in 2016 on daily deals, flash sales and other online discounts, up 53% from $3.6 billion this year, projects consultancy BIA/Kelsey.

The spending amount in 2012 will increase nearly 87% compared with 2011, BIA/Kelsey says. Despite those gains, the year-over-year growth rate will start to slow after 2013.

“After astronomical growth in 2012, the online deals marketplace is showing signs of maturity,” says Peter Krasilovsky, the company’s vice president and program director. “There has been consolidation in the space, deal conversion rates may be suffering due to over-familiarity and the market may be near saturation.”

BIA/Kelsey also found that just more than 50% of local and small businesses are “extremely likely,” “very likely” or “somewhat likely” to offer deals within the next six months. That’s according to a survey of 300 merchants. The remainder reported they are “not at all likely” or “not very likely” to offer such deals.

BIA/Kelsey predicts that more small businesses will turn to mobile deals designed to be quickly redeemed by consumers, along with offers tied to loyalty programs.

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