A Day in the Life of a Salesperson on the Front Lines of the Group-Buying Frenzy
Groupon and LivingSocial have ballooned into major corporations over the past year, hiring thousands of local salespeople who try to convince local merchants into participating in the latest fad: group buying.
While other sales positions have been hit hard by the recession, ranging from newspaper reps to real estate agents, it turns out not every one is losing out.
Fueled by hundreds of millions in capital and real revenues, the daily deal phenomenon is creating thousands of new sales opportunities–and the competition is heating up for trained workers with the contacts and experience.
Founded in 2007, LivingSocial has 1,350 total employees and Groupon, which has only been around since 2008, has more than 7,000. That’s not including all of the copycats, which also must hire local representatives in order to be live in a particular market. National providers are also flooding into the space, including well-established companies like Google, Facebook and Yelp.
But these aren’t the stereotypical door-to-door salesmen with briefcases full of samples. They carry iPads loaded with flashy presentations and are pitching something entirely new.
They are trying to sell local restaurants, spas, and yoga studios on the idea that in exchange for offering a steep discount, new customers will walk in their doors.
The frothy local sales market has been noticeable for Jessie Burrough and Harry Jigamian.
Burrough joined LivingSocial more than a year ago, becoming the company’s 24th employee after working as a commercial real estate broker for years. She is now responsible for some of the trendiest and most-trafficked neighborhoods in Seattle.
“It’s super fun, and it’s exciting when you believe in what you are selling. I remember thinking, this is a no-brainer, and that it is so easy to sell. I loved the idea,” she said.
For Jigamian, the decision was also easy, though he’d never heard of LivingSocial before they approached him.
He was a newspaper sales rep for the online-only Seattle Post-Intelligencer. He now oversees LivingSocial’s local sales office as general manager. “I did not know what LivingSocial was, but I knew that online was where everything was going. Now the only two questions are, ‘Where does it go from here, and how high does it go?’ It was all too much to say no to.”
If you aren’t familiar, companies like LivingSocial and its larger competitor, Groupon, offer a voucher for a steep discount, usually amounting to 50 percent off. Customers pay upfront for the coupon. Half of that revenue goes to LivingSocial, and the other half goes to the advertiser, who will end up making 25 percent on the overall transaction.
Normally, deals aren’t valid until a certain number are sold, sort of like buying bulk at Costco. That’s where the “group-buying” term comes from.
While it’s a large chunk to swallow, the daily deal companies want merchants to look at it as akin to placing an ad in the newspaper–except instead of hoping people see the ad and come into your establishment, you will know exactly how many people paid for one and how many redeem it.
Mostly, the focus has been on local commerce; increasingly, it’s expanding into national brands and advertisers, opening the door to nationally-focused sales people as well. (In a separate post today, I wrote about LivingSocial’s latest nationwide promotion on flowers for FTD.com after its prior offer on Groupon failed.)
Mitch Spolan, SVP National Sales for LivingSocial, said he decided to leave his job at Yahoo and join LivingSocial because, with group buying, “there’s no modeling and no guessing. You know when someone buys a voucher that they are fundamentally buying a ticket to come in and see that store.” As Spolan helps to build out LivingSocial’s national sales team, he says the concept makes it easy to recruit. “The sales people understand that. There’s such a desire to be in this space.”
Still, closing a sale can be difficult on the national or local level.
Some merchants have been burned after selling thousands of vouchers, and then losing money on every customer who walks in the door. For a small retailer with low margins, it can run them out of business.
Here’s a look at a day in the life of Burrough and Jigamian as they make two sales calls, and a video in which they explain how they got into the business.
The first stop was at a restaurant called Re:Public, located in the hip new South Lake Union neighborhood that is being revitalized by Microsoft Millionarie Paul Allen, but has been slow to take off. Their second stop was at the Garage, a warehouse on Seattle’s alternative Capitol Hill, which has been converted into an over-21 pool hall and bowling alley.
Re:public, which is not yet a year old, has never done a daily deal before, but the Garage was a veteran of the process, having participated in a LivingSocial voucher a year ago and experimenting with a handful of smaller competitors since. It has not worked with Groupon.
On an early afternoon, before the happy-hour crowds start to filter into the bar and restaurant that serves upscale dishes like grilled octopus and oxtail ragu, Burrough and Jigamian make an appointment to see co-owner Matt Greenup.
To get the conversation rolling, Burrough tries to get to know him by asking about the business.
Greenup explains that they were one of the first restaurants in an unestablished neighborhood. They opened before the streetcar ran from the downtown core and before Amazon.com relocated thousands of workers to new buildings nearby. It’s been hard, but they’ve also done a good job at filling its 115 seats in the early evening and on weekends. But not late at night when the vibe goes from upbeat to lowkey.
Enough about Re:Public. Now, Burrough introduces LivingSocial to Greenup.
On her iPad, she breezes through a presentation, moving from one slide to the next with the swipe of a finger. She keeps it light by joking that next she’ll be performing an interpretive dance routine. It’s a joke that makes this more of a friendly situation than a business meeting.
Some of the highlights:
- We have 10-plus million subscribers.
- We have 200,000 subscribers in Seattle.
- Our subscribers are between the ages of 20 and 40 with extra money to spend.
- You get a check from us in addition to 24 hours of exposure on our site.
- You get great social media exposure through our “me plus three” offer, which encourages people to share a deal with others.
But Greenup has concerns.
Re:Public has stayed away from discounts because their food is one of their highest costs. ”It’s a financial decision for us as to whether we want to cut into our profits,” he said. “If five tables are getting 75 percent off, that’s a big difference in return.”
To resolve those fears, Burrough has solutions.
She said they could make dinner reservations mandatory to ensure that a large number of LivingSocial participants came in on the same night. The description could also encourage users to come late at night to fill empty tables.
Jigamian adds: “You are already offering discounts at happy hour.”
But the pressure stops there.
Burrough offers to keep in touch and to send some ideas to him over email.
Now a hardened veteran of the process, owner Mike Bitondo was way beyond needing a flashy iPad presentation, and knew exactly what questions to ask.
Burrough acted as if they were friends who were catching up for the first time in awhile, and she had a lot to update him on with what’s changed over the past year at LivingSocial.
“We are better at managing the online redemption online,” she said.
Relieved to hear it, Bitondo said: “I’m sure that was the number one thing people asked for.” If only you could go back in time, he said, so that his 70 employees spread across six different bars wouldn’t have to continue manually checking off some of the 1,200 vouchers that still haven’t been redeemed.
“Only if you have a DeLorean,” she said with dead-pan humor.
Back to the future, she quickly adds that they do have smartphone apps, and secret shoppers who will report back on their experiences of being a patron. They also have free advice on how to update their Facebook page, or will even shoot a video for some of their best clients.
Overwhelmed by copycats calling him, Bitondo goes on a bit of a rant:
He’s heard from sites focused on families to ones that focus on giving back a percentage of the profits to good causes. The phone calls are nearly daily. “My big turn-off is that these people think they are geniuses, and that they have this really good idea. But in reality they want to take a large commission for sending out a mass email. It’s a transparent concept and they pretend to have this big facade about how great it is.”
Having said that, he’s willing to consider doing another deal in the slow season with someone he’s already dealt with. ”I have 40,000 square feet. It’s hard to fill a 1,200-person venue every day.”
He can only guess how many will sell this time now that LivingSocial is far less obscure. “I’m scared to think how much we might do this time,” he said.
For nearly a full day’s work, Burrough left empty-handed, but convinced that both would participate. The last we checked, she was still in discussions with Re:Public and The Garage with paperwork nearly completed for at least one of them.