Washington D.C.

3 Business Lessons from the Struggles of LivingSocial

Based out of Washington, DC, LivingSocial‘s website explains it is a “local marketplace to buy and share the best things to do in your city.” While the offers vary depending on which city you are in, the corporate headquarters are located in Washington D.C.

According to the Washington Post, LivingSocial will stop producing live events and close its facility at 918 F St. NW this spring as the company decides to focus the business on its core service–providing merchants with an online platform to market their products. This comes after the company posted a net loss of $183 million for 2013 and CEO and co-founder Tim O’Shaughnessy’s announcement that he is stepping down.

With the troubles or “growing pains” of the company, we decided to compile a list of lessons business owners can learn from our local version of the Chicago based Groupon.

  1. Focus. While it is okay to experiment, LivingSocial’s recent announcement show that companies, especially smaller ones with less resources should focus. It is vital in order to be successful that entrepreneurs and business owners focus on their core products and services that generate money. There’s a reason small business fail at such a high level and one of the reasons is lack of focus. If it was important for a venture capital backed company like LivingSocial, it is even more important for a small business with more limited capital and resources.
  2. Create an Economic Moat. A moat refers to “a businesses ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms.” The difficult thing for LivingSocial and Groupon is that there has been so many copycats that have eaten away at market share. Once the two became leaders in the market, there were thousands and thousands of clones that took their business. LivingSocial and Groupon were forced to try and create ways to differentiate themselves from their competitors. Unfortunately, neither company has been able to develop a strong Economic Moat. When a business is small, it can be difficult to have a true Economic Moat but as a company it is always important to understand your advantages over you competitors and try to leverage those strengths.
  3. Provide Quality Service. While LivingSocial was successful in getting customers, it wasn’t in keeping customers. For many local businesses LivingSocial and its competitors only brought those price shoppers that weren’t loyal to the business. These shoppers only came for the offer and often never came back. In order to keep clients and customers, it’s imperative that entrepreneurs provide exceptional service or an experience so that clients and customers won’t leave. If your clients and customers get a level of service above competitors and even above their expectations, they are likely to continue to work with you.

There are certainly more lessons that could be learned from LivingSocial and while they and Groupon continue to try and make their business model work there will be even more lessons entrepreneurs and business owners can take to try to reduce their risks.

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Gresham Harkless Jr.

Gresham Harkless is a Media Consultant for Blue 16 Media and the Blogger-in-Chief for CEO Blog Nation. CEO Blog Nation is a community of blogs for entrepreneurs and business owners. Started in much the same way as most small businesses, CEO Blog Nation captures the essence of entrepreneurship by allowing entrepreneurs and business owners to have a voice. CEO Blog Nation provides news, information, events and even startup business tips for entrepreneurs, startups and business owners to succeed.

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