Today's Living Social deal is for McDonalds. Let that sink in for a minute. Living Social, one of the major players in the very crowded "daily deal" space, is running a one-day deal with McDonalds, the largest fast food company in the world. Just $13 gets you five Big Macs and five orders of fries, and you only have today to partake!
While you are contemplating a $13 coronary, consider this also: it is just before 9am and 32,000 of these have already been purchased. This is likely going to be the largest deal for Living Social (or any daily deal site) for quite some time. Getting such a name as McDonalds to sign on also legitimizes the company and solidifies their business. While Groupon has been struggling with valuation math errors, compaints from customers and merchants, and a sinking share price after a questionable IPO, Living Social has been quietly humming along in the background making snappy commercials, adding new service lines like food and travel, and securing additional funding from investors.
This particular deal is not like the standard Living Social voucher. Typically users are emailed a voucher that can also be stored on an iOS or Android app. The user presents the voucher at the place of business, and the discount is applied. For McDonalds the buyer is actually mailed a coupon book, which I imagine will be much like those that used to be available at Halloween. With coupon in hand, the buyer is entitled to one free Big Mac and one free order of fries.
Previous complaints about daily deal sites have centered around the experience at the register. In some businesses the employees are completely unaware that a deal is circulating. In some cases the employees had knowledge of the deal but no knowledge of how to actually ring it through. It's my guess that McDonalds is using coupons in order to minimize this effect and to also account for the scope of trying to train all cashiers on a new process. Having a physical coupon will also allow for easy tracking of redemption, although the figures may be skewed as the coupons do not have an expiration date.
Living Social and McDonalds are both taking a risk with this venture. Living Social has tried to present itself as a company that wants to introduce you to adventures and new experiences. It's safe to say that a Big Mac is neither of those things. Living Social is also putting itself at risk in terms of fulfillment (if they are the ones sending the coupons). McDonalds is certainly at risk just like any other merchant that uses a daily deal program. Any of the complaints that a mom-and-pop pizza store face are possible at McDonalds; with McDonalds, however, the complaints will be magnified by about 13,000 (the number of US locations).
It's taken me about 20 minutes to write to this point, and another 7,000 deals have been purchased. At this pace McDonalds will sell half a million voucher books today worth about $13 million (based on average value of $26). As the sales tick up over the course of the day, and as these coupons start to get redeemed, it will become clear if this was a smart move or not. McDonalds is likely banking on coupon users making additional purchases while in-store. Living Social, however, is likely banking on this to bring in more large-name companies as their nearest competitor continues to expire as fast as a daily deal.
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