LivingSocial Finds That Full-Price Offers Work Better on Mobile Than Discounts
LivingSocial is killing off its last-minute offers for restaurants and spas in favor of a new full-price service it calls Takeout & Delivery.
“This is the bigger opportunity we see under real-time commerce, based on the adoption we’ve seen with our members and the feedback from the restaurants,” said Greg Mazanec, LivingSocial’s general manager for Takeout & Delivery.
The move is a big step away from the company’s roots of offering large discounts to draw patrons into a store or restaurant. But the step also raises the broader question of whether mobile commerce — as we’ve envisioned it for years — will ever take off.
For the past decade, mobile executives and others have promised that, someday, consumers will be alerted of nearby deals or specials on their phone as they walk by a coffee shop or a restaurant. For example, a free latte with a purchase of a scone, or free fries with a burger and milkshake.
More recently, LivingSocial and Groupon were considered clear front-runners for bringing that promise to scale, because both have a large user base and a dense enough footprint of local businesses for it to work. But now LivingSocial is downplaying the idea of location-based offers, a year after launching.
Groupon, which launched a competing product called Groupon Now soon after LivingSocial Instant, continues to offer these real-time deals.
Mazanec declined to say how Instant performed financially, but said it was the company’s first attempt at “real-time commerce,” and it turned out that the response for takeout and delivery had been extremely high. ”It was the repeat behavior that was important to us,” he said.
Now the value is centralized around convenience instead of discounts. That’s something merchants generally like more, too. Instead of offering discounts to people who may have already been looking for a latte or a burger, now they are drawing in more people at full price.
Mazanec describes the nearby Mexican restaurant that already had a long line during lunch. He said the only way for them to sell more food without expanding physically is to offer takeout and delivery.
“Consumers aren’t pulling their phones out to search for the nearest real-time discount on a car inspection or framing service. They are, however, looking for a faster and better way to order food from their favorite local restaurants,” he said.
Now, Takeout & Delivery will replace Instant on the LivingSocial apps.
The mobile app allows users to place and pay for orders for either pickup or delivery. On the back end, the restaurant receives the order by fax, and is able to say how long the order will take to fill. Consumers who show up for takeout are directed to a specific line and can pick up their order without having to pay. Restaurants that offer delivery are responsible for supplying the drivers.
Discounts can always be layered on top of the transaction if a merchant wishes, but it’s no longer the starting point. LivingSocial shares the revenue from the transaction.
“This helps broaden our offerings and puts us in a place where we can offer fast casual to five-star gourmet,” he said.
By adding the service, LivingSocial also starts competing with other delivery services that have declared this to be a big market opportunity.
Seamless, a New York company focused on online delivery and takeout, recently acquired MenuPages and booked more than $400 million in orders last year. And GrubHub, a Chicago-based company, recently raised $50 million and acquired Dotmenu and Allmenus. GrubHub projected that orders would hit $225 million in 2011.