Groupon Declines on Concern That Merchants Are Retreating From Daily Deals

Groupon Inc. (GRPN) shares fell 6.6 percent after a survey from Susquehanna Financial Group indicated that about half of merchants that have offered a daily deal have no plans to do so again in the next six months.

Groupon dropped (GRPN) $1.36 to $19.27 at the close in New York. The shares are trading below the level of their initial public offering, which priced at $20 in November.

The company is the biggest seller of daily deals, which provide discounts of as much as 90 percent at restaurants, nail salons and other businesses. Susquehanna and daily-deal aggregator Yipit surveyed almost 400 merchants to determine the value of the services and the concerns companies have about using them. While 80 percent of respondents were satisfied with daily-deal companies, about 52 percent of merchants said they’re not planning to use deals in the next six months.

“The two biggest concerns our respondents face with the daily-deal companies are high levels of discounts associated to services/products offered and low repeat rates from customers after consummating a deal,” Herman Leung, a Susquehanna analyst, said in the report. He has a “neutral” rating on Groupon’s stock (GRPN).

Almost 23 percent of merchants said that the heavy discounts required by daily deals were their biggest concern. Still, about 45 percent of respondents said they acquired more customers as a result of offering the promotions, and 26 percent said they represent a “new, unique and diversified marketing channel for their business.” For the survey, Susquehanna and Yipit called merchants that have featured deals from companies such as Groupon and its chief rival, LivingSocial.

Julie Mossler, a spokeswoman for Chicago-based Groupon, declined to comment.

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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