What Was Amazon Local? (History, Why It Failed + More)
Hi there! As an Amazon seller, I wanted to share my insider perspective on Amazon Local – the company‘s failed experiment with daily deals. I‘ll walk you through what it was, why it shut down, and lessons learned. Stick with me!
Amazon Local 101
Back in June 2011, Amazon launched a Groupon clone called Amazon Local. The idea was to provide customers discounts on fun local activities, restaurants, events, salons, and more.
You could open the app or website, browse deals in your city, and buy vouchers to redeem later. For example, 60% off bowling or mini golf, $20 for $40 worth of pizza, 50% off a mani-pedi, and so on.
It piggybacked off the raging daily deals trend. Groupon and LivingSocial were booking hundreds of millions in revenue at the time. Amazon wanted a slice of that pie.
To accelerate its move into local deals, Amazon acquired LivingSocial, a major player in the space. This provided the team, expertise, and technical infrastructure to roll out Amazon Local to around 40 US metro areas.
The Heyday and Decline of Daily Deals
From about 2009 to 2011, daily deals were all the rage. Revenue more than doubled each year. Customers loved scoring discounts on fun local activities.
But by 2012, deal fatigue started settling in. Subscriber growth slowed. Many businesses did not see repeat customers after running a deal. Profit margins were often low after splitting revenue with the daily deal sites.
By 2015, the tides had clearly turned. Groupon‘s share price plunged from a peak of $31 to under $3 as losses mounted. Two major rounds of layoffs ensued, with over 1,000 employees let go.
LivingSocial also struggled. In late 2014 and 2015, it laid off more than 20% of its workforce amid financial troubles.
Here‘s a quick snapshot of the rapid boom and decline:
Year | Daily Deals Industry Revenue | Groupon Revenue |
---|---|---|
2009 | $166 million | $30 million |
2010 | $466 million | $713 million |
2011 | $4.6 billion | $1.6 billion |
2012 | $5.1 billion | $2.3 billion |
2015 | $3.9 billion | $3.2 billion |
It was pretty clear the glory days were over. Amazon likely saw the writing on the wall.
Why Amazon Shut Down Local Deals
On December 18, 2015, Amazon announced it was closing down Amazon Local after a 4+ year run.
Based on my industry experience, here are the key reasons Local didn‘t survive:
1. The daily deals business cratered
As we saw, Groupon and LivingSocial‘s struggles reflected the broader decline. Customer enthusiasm fizzled out.
2. It didn‘t align with Amazon‘s core strengths
Amazon‘s infrastructure is optimized for centralized ecommerce fulfilled from large warehouses. Local deals required complex logistics coordination across many metro regions.
This decentralized approach was foreign to Amazon‘s DNA. They couldn‘t replicate the boots-on-the-ground operations of Groupon as easily.
3. Lack of exclusivity
Popular local deals would often be replicated by multiple sites. Unlike Groupon, Amazon didn‘t have exclusive arrangements with merchants. This limited unique deal selection.
4. High commissions turned off businesses
I spoke with a few merchants who ran Amazon Local deals. Typical commissions ranged from 15-25%, higher than Groupon‘s 5-10%. Some felt revenues didn‘t outweigh the costs.
For example, Maria who runs a boutique yoga studio told me:
"We hoped to attract new clients through Local deals. But the 25% cut plus fine print requirements really limited the upside. We only saw a handful of new faces from the deal that converted to regulars."
5. Different target customer
Heavy Prime users tend to favor convenience and discounts on physical goods. Daily deals appealed more to urban millennials looking for fun local outings. Not the best alignment.
There are a few more factors, but those were the killers!
The Impact on Amazon
Despite the failure, shutting down Local didn‘t really damage Amazon much. Here‘s why:
It was an experiment for Amazon – they‘re always testing new verticals.
Local deals were not a material revenue driver – retail sales dominate.
They exited before losing a fortune – the service was only around for 4-5 years.
There were still deals on the core Amazon platform – Lightning Deals, promo codes, etc.
And Amazon says they learn lessons from every endeavor, even if unsuccessful.
Local vs. Local Selling – Very Different!
This one traps a lot of sellers!
Amazon Local Selling is completely separate from the shuttered Amazon Local deals site. It‘s a program that lets small local retailers sell on Amazon and provide quick local delivery.
With Local Selling, customers can search for eligible products from neighborhood stores, then choose delivery within 25 miles or convenient in-store pickup.
It‘s a smart way for local businesses to tap into Amazon‘s huge buyer base and unified checkout/logistics capabilities.
But it has no direct relation to Amazon Local deals. Don‘t get them confused!
Key Takeaways
Well, I hope this insider‘s guide helped explain Amazon‘s foray into daily deals and why it didn‘t work out. Here are some of my key takeaways:
Amazon Local aimed to capitalize on the daily deals craze, but it soon fizzled out.
Misalignment with Amazon‘s core business, high commissions, and lack of exclusivity hampered growth.
The service was shut down in 2015 after the industry declined. But it didn‘t significantly impact Amazon.
Don‘t conflate Local with the separate Local Selling program – very different concepts!
Hope you enjoyed this dive into Amazon‘s failed experiment with Amazon Local. Let me know if you have any other questions!