LivingSocial, and to a lesser extent Groupon, are dubiously fishing around for new services,as if they don’t have a long-term plan. Despite their marketing prowess from group deals, they haven’t been successful in these endeavors and are often abandoned for another pet project.
New Service: Takeout and Delivery
LivingSocial has launched yet another service, replacing their instant deals with takeout and delivery. In 26 markets, this change has already gone into effect (but not New York or Los Angeles). Like Seamless and Grubhub, LivingSocial is not doing the actual deliveries but processing them online. LivingSocial have given up being market makers and are market invaders, using their financial resources and urban visibility to capture a slice of the market
They enter a different market with established competitors, Grubhub and Seamless. Unlike group deals, LivingSocial will have to put a sales service (not just representatives) on the ground to sway restaurant owners. It won’t happen overnight; in Washington D.C., their home city, they don’t have around 100 restaurants doing delivery. They have attracted more restaurants for takeout, but delivery is better at building loyalty (like Seamless has). It has the feeling of a gift when food arrives at your door without you leaving your desk.
Increased Competition, Lower Rates?
The cut that online delivery/takeout services take from restaurants’ tab may come down as LivingSocial upsets the balance in many different cities. Restaurants frequently pay over 10% of the tab for online delivery/takeout, a service that is mostly automated. However, LivingSocial seems to have lost its momentum and marketing touch, and may not grab a hold in this market. They have pushed LivingSocial Instant Deals (very short time frame), Gourmet (invitation only for wealthy), White Glove Service (like room service), and nationwide deals (which they normally take a loss for a big retailer). The only one that could have been a serious revenue stream was the instant deals, but they marketed it poorly and didn’t consider some of the structural problems.
LivingSocial’s success in the takeout/market is an open question. Seamless and Grubhub have become formidable companies (and directed like buying the big menu websites). But it all depends on if LivingSocial knows what it is doing.