Steven Gradidge. Hi :)

The Local Business Vs. Groupon Vs. LivingSocial

Posted on: April 5, 2011

As the likes of LivingSocial and Groupon go from strength to strength, what does this mean for local merchants and service providers in the long run? Social buying groups have hit the net (and our inboxes it seems) like a David Haye right hook so lets take a little look at them.

Launched in 2007, LivingSocial is now valued at $3 billion and not too surprisingly received $175 million in financing from Amazon in January 2011. It claims to ‘design total experiences that bring an adventurous, loyal new following to local businesses.’ It has just raised a further $400 million in further investment!

Groupon was launched in 2008 and in April 2010, valued at $1.35 billion. In late 2010, Groupon turned down a reported $6 million buyout from Google. No petty change indeed. They are expected to go public this year, with an IPO of $25 billion.

For those that have not experienced the delights of Groupon/LivingSocial yet I implore you to check them out! You can get some absolutely amazing deals which in my case, have been too good to turn down. I am assuming the premise of the merchants offering such hefty discounts is to encourage new customers via attractive deals as such and then in theory get them to return at full price. Have I? No. Will I? Hell no, I got 78% off that 3 course Mayfair lunch for 2.

I am not alone in this either. From Twitter and forum research, what seems to be happening is customers are initially attracted by the deals and then leave once another ‘too good to say no’ merchant offer comes available. This doesn’t seem a very sustainable business model and certainly one that could inevitably collapse under its own success.

Groupon and Living Social Do Battle

They are certainly a love hate thing. As much as I love getting a good deal, all these artificial/electronic/’I will take a cut’ markets such as LivingSocial, Groupon and the App Store really do grind my gears. To get local merchants to bend over so subserviently and mercifully and their will shows that LBS partners are not for every business. These falsified selling channels are eroding customer retention where a stable and returning customer base is sacrificed upon price and value, not quality!

Another problem with Groupon and co. from a strategy standpoint is that focus is solely based upon the promotion of price. Think about this:

How can a company develop its brand through an eroding ‘bidding’ process such as Groupon and LivingSocial?

A couple of months ago I wrote a blog post questioning the validity of location based services and how they will be utilised by the consumer. To paraphrase:

Since becoming established in any given marketing campaign, social media has forced social action…The technological medley of smart phones, mobile broadband and LBS applications will connect us in more meaningful ways as both consumers and advertisers that matter most to us.

Well now I’m not so sure (he types while looking rather flush in the face). Google AND Facebook will be arriving at the party soon too no doubt…

Please let me know your thoughts…

Steve
🙂
@StevenGradidge

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