In 2011, LivingSocial, which is an app offering instant deal from local retailers for hungry consumers, received $176 million from Amazon. At that time, LivingSocial’s CEO, Tim O’Shaughnessy said, “we think we can redefine how people are interacting with one another.” He had two goals for LivingSocial: overtaking Groupon and maximizing his company’s potential to maintain a sustainable path of growth. (From the HBR Case Study)
At that time, this new industry that offering short-lived discounted deals to consumers had become one of the most talked-about developments in the business world. However, Amazon took a $169 million charge in the third quarter of 2012 due to the declining value of LivingSocial after consumers and retailers lost enthusiasm for internet coupons. (From Bloomberg) And in Oct 2016, Groupon bought its one-time rival in the daily deals market with a really low price.
Both companies experienced a decline in recent years. LivingSocial even replaced its CEO, cut more than half its workforce and tried to focus more on offering customers fun “experiences,” regardless of whether they’re 50% off. (From CNNTech) An article from Mashable even gave its title as: “ Groupon buys LivingSocial, reminding people that those companies still exist“.
Do consumers really not want and need short-time discounts from local merchants anymore? Or, it’s just the time for Groupon and LivingSocial to adapt the market change and innovate to meet consumers’ needs again.
Based on my experience of using these apps, I went to them because I wanted some guide for my leisure time. What are the cool places I can go? What are the good deals I can get? But every time I opened those two apps, I felt a little bit overwhelmed by the never-ending list of the nearby local businesses and their deals on the home page. I felt that I was even more perplexed. And it’s also hard for Groupon’s email deals to catch my eyes.
O’Shaughnessy had a long-term sight of the industry, but he failed to develop his business into the real “local commerce” which can embed valuable offers into consumers’ everyday lives. The diversification of the deals is not enough. The website or the app is still weak at helping customers make choices and purchase decisions. The UX of the app is not good enough. The local businesses should be divided into more categories for consumers to more easily search what they really want.
There’s a really good example of “local commerce” industry in China, which is called Dianping. Dianping, founded in April 2003 in Shanghai, China, is a website providing independent consumer reviews on local services in the world. In addition to merchant information and consumer reviews, Dianping also offers group-buying, online restaurant reservation, take-out delivery, e-coupon promotions, and other O2O services, covering local businesses in industries including dining, movies, lodging, entertainment, beauty, wedding, mom & kids, home renovations, etc. Its accumulated users have reached over 250 million. (From Dianping) And its footprint nowadays has already covered approximately 2,500 cities worldwide, where Chinese-speaking consumers can get deals and guide.
Dianping got its idea from Zagat, but it’s much more than Zagat now. User-generated content, large resource and data from local commerce and the social function make it a popular consumer guide in China.
Dianping’s business model may be not also suitable for the US market, but it provides Groupon and LivingSocial a possible approach to the success.