July 17, 2012, 2:25 PM

LivingSocial’s new marketplace

LivingSocial Shop follows in the footsteps of Groupon Goods.

Lead Photo

Daily deal seller LivingSocial Inc. today launched LivingSocial Shop, a Groupon Goods-like marketplace where shoppers can buy a small number of products from a mix of national and local merchants for a set period of time, typically about seven days. While this isn’t the first time consumers could buy physical products on LivingSocial, it is the first time those products are being marketed under a single banner.

The products will include a diverse array of items tied together by themes, says Emily King, director of LivingSocial Shop. The first batch of items, for instance, centers on the beach, with products such as sand buckets and folding chairs. “LivingSocial inspires our members to get out, discover new things and truly experience life," she says. "LivingSocial Shop is an extension of that idea.” The aim of the themes, she says, is to spur shoppers to buy multiple items so that they can capture a full “experience.”

The Shop takes its apparent inspiration from Groupon and its burgeoning Groupon Goods marketplace. Groupon’s marketplace launched with a bang, selling $2 million worth of goods in its first week last fall. And those strong sales have continued. Groupon Goods is expected to sell between $600 million and $800 million worth of goods this year, says Scot Wingo, CEO of e-commerce services provider ChannelAdvisor Corp.

While Shop officially launched today, LivingSocial began testing the service in Cincinnati last month. Daily-deal aggregator Yipit estimates LivingSocial Shop sales could approach $200 million this year. Yipit’s estimate is based on the sales performance of 15 product offers run in Cincinnati in June that generated $39,000 in revenue. Extrapolating those sales to the rest of the United States, while also assuming that the daily deal operator could increase the number of offers it runs in a month to 30, a nationwide rollout could generate $187 million, Yipit says.

If that estimate proves correct it would mean that the online marketplace would be among the largest in the United States—behind only eBay, Amazon and Groupon, Wingo says. “If you combine the revenue generated between Groupon and LivingSocial you have a new $1 billion player,” he says. “If they were a retailer they would about the size of Kohl’s Corp. in terms of online sales. That shows the scale of this.”

If the two fledgling marketplaces reach that  $1 billion point, the question becomes where those sales are coming from, Wingo says. “Is it incremental sales or is it encroaching on the Woots, eBays and Wal-Marts of the world?” he asks. “I think it is a value play for consumers and is taking sales from those who play in that space.”

LivingSocial’s revenue increased 168.3% year over year in the first quarter of 2012 to $110 million, according to Amazon.com. According to an Amazon filing earlier this year, the e-retailer owns a 29% stake in the daily deal operator that's worth $298 million. 

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