Groupon and LivingSocial are up-and-coming businesses backed by millions of dollars in venture capital. Both companies sell vouchers online that are redeemable at businesses around town.
The national operations will challenge several local versions that have sprung up in recent years.
Chicago-based Groupon partnered with Avalon Restaurant and Bar in the Fan to offer its first daily deal in Richmond yesterday. Customers had until midnight to buy a $30 coupon for $15. The website had sold just under 200 at 8 p.m.
“We’re really excited, especially to be part of the first day of the launch of the business,” said Abi Huntington, manager of the restaurant.
Huntington said a sales rep from the company contacted the restaurant about participating based on its positive reviews.
“We started looking at other cities where Groupon had been launched and checked out the website, and it seemed like a nice business venture to get people in here,” Huntington said.
Groupon offers a new deal at a different business each day in each city it operates in. For its Richmond debut, Groupon offered two deals. The second was for Eerie Nights Ghost Tours of Shockoe Bottom, which had sold almost 80 half-off vouchers with three hours left to buy.
Groupon operates in 94 U.S. locales as well as in several countries and offers discounts of 50 percent to 90 percent depending on what the business wants to do. The business does not pay to participate, but they must agree to honor the discount. Groupon sends the vouchers to the customers after the deal expires and sends a check to the participating business, which takes a percentage cut.
There is a catch: The deal is only valid if a set number of people buy a coupon.
“It’s called collective buying,” said Julie Mossler, public relations manager for Groupon. “You need a group of people together to get a discount.”
Groupon and the businesses decide on a minimum number of deals that need to be sold for the deal to stick.
“We ask them, ‘at what tipping point would you be willing to offer a discount?’” Mossler said.
If not enough people bite, those that did buy get their money back.
Mossler declined to say how many sales reps they had on the ground in Richmond but said they have been working for a few months on lining up business that want to participate. The company adds two or three cities every few weeks or so.
As for customers, Mossler said, the company relies mostly on word of mouth and online advertising.
“Groupon fans often travel a lot and patiently wait for new cities to launch. We’ve been collecting subscribers in Richmond for a few months,” Mossler said.
Mossler said they have been gaining fans on Facebook, as well.
Also launching a similar service in Richmond yesterday was Washington-based LivingSocial.
LivingSocial’s first deal in Richmond was a $40 voucher to Julep’s in Shockoe Bottom for $20.
Like its primary competitor, the business featured in the deal does not pay anything but must agree to honor the voucher. LivingSocial takes a percentage cut from the voucher sales and writes a check to the business for the rest.
Owner Amy Cabaniss said she thought it would be a fun way to market the business.
“I hope to get new folks in the restaurant and introduce them to what we do here,” she said.
As of last night, 142 vouchers had been purchased.
LivingSocial is also integrated with Facebook. Subscribers to LivingSocial who buy that day’s deal can get it for free if they get three friends to buy the deal. People who buy the deal are also encouraged to become fans of the business.
“It’s a good way to capture their info and let them know about Julep’s if they sign up,” Cabaniss said.
Ashley Stoner, Richmond’s LivingSocial sales rep, said yesterday that the initial results exceeded her expectations. The company launched in 25 new markets yesterday, doubling its coverage.
“Today has been a big deal,” Stoner said.
Stoner said she has been pounding the pavement to get companies to participate.
“I am a Richmond native, so I started with all my favorite places and worked from there,” Stoner said. There is no minimum number of sales.
“If two people buy the deal, then two people get the deal,” Stoner said.
Al Harris is a BizSense reporter. Please send news tips to [email protected].