LivingSocial Launches E-Commerce, a Business Worth $200 Million a Year
Today, LivingSocial officially announced its first foray into selling physical products. — LivingSocial Shop is similar to the company's original business, in that it will send an email to consumers, offering a limited set of products at a discount.
Context & Ripple Effects
LivingSocial's move into physical goods is the latest step in a rapid diversification away from pure daily deals. Backed by Amazon's $175 million investment and a Series E authorization of up to $565 million, the company scaled fast enough to disclose a $2.9 billion valuation on roughly $50 million in monthly revenue in April 2011 — but an Amazon filing later showed a $558M loss for 2011, underscoring how expensive the race with Groupon had become.
The company has already proven its email channel can move physical products at scale: a January 2011 promotion sold a million $20 Amazon gift cards. LivingSocial Shop applies that same discounted-email mechanic to a standing catalog of goods, with management valuing the business at an estimated $200 million a year. It follows this spring's ONOSYS acquisition for online ordering and the March departure of co-founder Eddie Frederick.
First-order effects
- Groupon now faces a rival whose revenue base extends beyond service vouchers into discounted physical goods sold through the same email list, widening the competitive front between the two deal leaders.
- Brands and product sellers gain a new high-volume discount channel through LivingSocial Shop, while LivingSocial itself gains a second revenue line to offset the heavy spending behind its deals business.
Second-order effects
- Groupon and other daily-deal rivals face pressure to bolt product commerce onto their own email inventories, since LivingSocial can now monetize subscribers who never buy a local voucher.
- Amazon, LivingSocial's largest strategic backer, sits adjacent to a fast-growing discount-goods channel built on its own earlier gift-card promotion — a relationship that shapes both capital and merchandising dynamics.
Third-order effects
- If the pattern holds, daily-deal companies consolidate from single-product voucher sellers into multi-line local-commerce platforms — deals plus goods plus ordering software — where the size of the engaged email audience, not deal volume alone, becomes the core asset being valued.
- Email-driven flash retail risks commoditizing discount expectations across categories, pushing margins toward whoever owns the customer relationship rather than the inventory.
The trend: Daily-deal leaders are converting their email audiences into diversified commerce platforms, layering physical goods and adjacent acquisitions onto the original voucher model to escape dependence on any one revenue line.