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US consumer spending on online deals (daily deals, instant deals, and flash sales) is forecast to reach $3.6 billion in 2012, up 86.9% from the estimated $1.8 billion spent in 2011, according to a report by BIA/Kelsey.

However, the forecast also signals a maturing market. Spending on deals is projected to grow 23% in 2013, followed by mid-single-digit growth over the following three years, translating to a compounded annual growth rate (CAGR) of 19.8% over the next five years, reaching $5.5 billion in 2016.

Below, other findings from the latest wave of BIA/Kelsey's Local Commerce Monitor (LCM) study of US small businesses.

Merchant Adoption of Deals

More than one-quarter (26%) of small businesses surveyed say they are "very likely" (15%) or "extremely likely" (11%) to participate in a deal in the next six months. An additional 24.3% say they are "somewhat likely" to do so, signaling that more than one-half of the small businesses surveyed have a favorable view of deals.

"After astronomical growth in 2012, the online deals marketplace is showing signs of maturity," said Peter Krasilovsky, vice-president and program director at BIA/Kelsey.

"There has been consolidation in the space, deal conversion rates may be suffering due to over-familiarity, and the market may be near saturation. Still, market leaders continue to exhibit growth as market awareness and penetration spread."

Online deals are expected to become an anchor for a platform of nonadvertising small-business services—instant mobile deals, loyalty products, promotions, reputation management, transaction processing, and ecommerce—according to BIA/Kelsey.

Loyalty Programs

The study also explored the use of loyalty programs among local merchants. Among those surveyed, nearly nine in ten (88%) say they have a loyalty program in place, and most of those programs are proving to be successful:

  • 53% say loyalty program customers are high quality.
  • 68% say loyalty program customer increase business.   

About the data: Findings are based on data from BIA/Kelsey's Local Commerce Monitor Wave 16 survey of small business advertisers with additional research from BIA/Kelsey.

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