Groupon Stock Stumbles As Main Street Merchants Pull Back
Perhaps Wall Street is listening to Main Street after all.
Daily deals site Groupon, which went public in early November, is seeing its stock price tumble after a recent report found that most business owners who previously offered a daily deal have no plans to do so again in the next six months.
Groupon's stock slipped 9.1 percent in the two days of trading following the report's release on Tuesday. That's Groupon's largest two-day drop since it went public, excluding a rough week in late November, signaling that Main Street's concerns over the daily-deals model continue to weaken public investors' demand for the industry leader's shares.
The study, by Susquehanna Financial Group and daily-deal aggregator Yipit, found that merchants were most concerned about how much deal sites require participating vendors to discount their goods, as well as the low rate of repeat business gained from consumers who purchased the offers.
As such, 52 percent of merchants said they had no plans to offer a daily deal in the next six months, and 24 percent intend to feature only one deal during the same period.
As for the market's harsh reaction to the survey, which collected data from only 100 merchants, "it's almost as if investors were looking for a reason to dump the [Groupon] stock," All Things Digital's Tricia Duryee noted, citing that the study was largely positive.
Notably, the study found that 80 percent of merchants said they enjoyed working with daily deals sites — such as Groupon, Living Social and the growing list of competitors — which shows that "the vast majority of merchants who have run deals are happy with their experience," Brendan Lewis, a Living Social spokesman, told Bloomberg. "You'd be hard-pressed to find an 80 percent satisfaction rate among merchants for any other marketing channel in use today," he added.
But recent data show that, for Groupon at least, the local-deals business is declining, a sign that while merchants may "enjoy" working with deal sites, fewer small businesses are signing up to offer daily deals through the industry leader, whose stock is suffering as a result.