Nate’s Taco Truck and LivingSocial: a marriage of (beneficial) inconvenience

LivingSocial is making millions of dollars, and local businesses are getting in on the action. But is “social commerce” always a good fit for small businesses? Nate’s Taco Truck Stop recently partnered with the rising social commerce company. Their first date didn’t go so well.

When I ask him if he would ever partner with LivingSocial again, Nathaniel Gutierrez, owner of Nate’s Taco Truck, is blunt: “Probably not.”

On June 10, 2011, LivingSocial members received an appetizing offer: spend $10 for a $20 coupon good at Nate’s Taco Truck Stop, a downtown restaurant at 315 N. 2nd Street that he opened in December of 2010. So, how did Nate go about initiating the partnership with this potential billion-dollar company? How did he, as revered as he is in Richmond, get them to even pay attention to him?

He didn’t. “They called me,” he said.

When Nate expressed interest over the phone LivingSocial sent a representative to speak with him, customizing the deal to fit both Nate’s capabilities and interest. It was the “first time I’ve paid for any kind of advertising,” he said, done largely out of “curiosity” towards the process of the LivingSocial’s Daily Deal.*

Based in Washington, D.C., the company, which competes with Groupon, received funding from Amazon in the amount of $175 million back in late 2010. Speaking after that announcement, Tim O’Shaughnessy, LivingSocial’s CEO, indicated that their goal is to be “the biggest player in the local commerce space.” It’s estimated that LivingSocial will make $1 billion in 2011.

To make money, LivingSocial, as well as Groupon, takes a cut of the already undercut revenue. In Nate’s case, LivingSocial received $5 for every $10 coupon purchased. For every customer who came into Nate’s Taco Truck Stop, Nate received only $5 for every $20 worth of dispensed food, a loss of $15 per order. LivingSocial sold 441 coupons (an $8,820 value), earning the company and Nate $2,205 each. Customers have only redeemed about 100 of the existing coupons, although the terms of the deal allow remaining customers until December 14 to do so.

The attraction for Nate in partnering with LivingSocial was that it could bring new customers to his downtown location. But did it?

It did.

“It brought people in, which is exciting.” That excitement, however, did not surpass the unfortunate issues with the Nate/LivingSocial partnership.

Initially, Nate was alarmed by the number of coupons sold. Not only did he worry about having enough food to accommodate what he assumed to be soon-attending patrons, but his small business, a rather diminutive one compared to other small businesses, does not have the capital to adequately cover a significant loss of revenue. Nate may ultimately spend $6,615 on the advertising campaign, a campaign that has not gone off without a hitch.

An oversight in the coupon’s fine print allowed the coupon to be purchased beyond the single day to which Nate agreed. After noticing the error, he contacted LivingSocial, who informed Nate that it was a problem that they were unwilling to fix. Additionally, the fine print also allows for the coupon to be redeemed more than once, a condition that Nate never agreed to. Then there’s the matter of location.

The principal reason that Nate partnered with LivingSocial was “to get people into the new shop.” Customers did not have to purchase food in the shop. Instead, they could obtain a voucher that they could then use at the food cart. The food cart, as many Richmonders will attest, is busy enough at either its VCU and weekly Forrest Hill Farmers’ Market locations; adding the additional LivingSocial paperwork would have been far too nettlesome for his already occupied and cramped employees. This aggravated some customers who did not want to travel to the downtown location. “So, I made a couple people angry,” said a nonplussed Nate.

When I ask him whether he would recommend a social couponing venture to other restaurants, he says it would be “better for a restaurant with booths” and tables where patrons could order additional food and drink to help offset the total sustained losses. Nate didn’t have that luxury. The ordeal, however, was not all for naught.

“Every day it’s gotten busier,” said Nate of his restaurant. While drafting this article on Friday afternoon, shortly after Nate’s Taco Truck Stop opened, one person tweeted that there was a “line out the door.” When asked if his small business was in any financial straits to honor the remaining unclaimed coupons, Nate said, “I’m sure I can fulfill my part of the deal,” adding “I know I’ll be able to do it.”

Related:

* Interestingly, his wife, who runs an acupuncturist business, was previously unable to solicit a Daily Deal promotion with LivingSocial, as they do not yet offer such deals to acupuncture businesses.

  • error

    Report an error

Nathan Cushing

Nathan Cushing is a writer, journalist, and RVANews Editor.

Notice: Comments that are not conducive to an interesting and thoughtful conversation may be removed at the editor’s discretion.

  1. john m on said:

    Seems like he could’ve bought $500 worth of advertising here or in Style or whatever saying “50% OFF” and saved a ton of money.

  2. I also own a small business and was considering a Groupon. Like Nate, our hot sauce business doesn’t have the ability to take on a loss. This article is making me think about whether it’s worth the trouble- especially since we are an internet-based business with no physical storefront!

  3. I was surprised to see Nate jump on the social coupon bandwagon, but it makes sense if he was trying to put his dowtown storefront on the map. A detail that isn’t given nearly enough attention: A LOT of people don’t get around to using their voucher before the expiration (I don’t have stats, just a pile of groupons I’m sitting on). So, Nate can deduct from the losses those five bucks for each person who doesn’t follow through.

    The thing that seems to stop businesses in their tracks is all the complications and misunderstandings. A casual curious customer suddenly becomes an entitled a-hole as they try to redeem their coupon in pursuit of bargain food.

    About that “redeemed more than once” detail. I’m assuming that’s a reference to using part of the $20 and coming back to cash in on the rest in another visit? Yeah, that’s a headache for any business.

  4. @Jason G., these places should offer a mobile app for vendors that handles all of the scanning and tracking of these things.

    The RVANews offices picked up a couple for Rostov’s and they just have a big black binder they keep and constantly update with your coupon’s total. That would *never* work in a tiny taco box.

  5. RobinsonSt on said:

    This is unfortunate, but it is well documented online what Groupon and Living Social deals can mean for small businesses (ex. this post went viral ages ago: http://posiescafe.com/wp/?p=316). If a business cannot set the terms and coupon price points, then it should not agree to the promotion.

  6. lindsey on said:

    i used to go to the taco box at vcu regularly, but now that i’m not a student, i never have nate’s. i gotta say, i’ve been excited about the deal to finally get me off my duff to find the shop and start going regularly again in lieu of chipotle or the other big mexican chains. it sucks that the deal was hard on the business, but it brought this customer back!

  7. Living Social has called our office several times. I have heard many horror stories like this. The coupons never seem to justify the business overhead even with the increased traffic. Google is also starting their own version of daily deals soon, so many businesses will probably get solicitation calls all the time.

  8. Bryan on said:

    I used Living Social once and doubt I will ever use it again.

    Recently I bought a whole-house cleaning for what seemed an unbelievable price. What was unbelievable was the incredibly bad job the company did (not wiping down cabinets, not dusting bookshelves, etc.).

    I wrote a letter to both the company and Living Social complaining about the service. That was about month ago, and I still have not heard from anyone.

    I should have just taken my money and lit it on fire.

  9. genevelyn on said:

    Have any RVA restaurants who have participated in Groupon or Living Social noticed return visits from new customers initially wooed by half-price vouchers or a spike in sales revenue after the voucher’s expiration period? If so, was it worth the cost of participating in one of these services?

  10. csb on said:

    See, I only buy these coupons from places I frequent anyway, which defeats the purpose, right? Since, I already frequent the place, I’m not the target audience for the coupon… however, I always take out a bunch of friends and tip crazy generously (like 50% of the bill before the coupon) so that I don’t get blacklisted.

  11. sarah on said:

    @RobinsonSt – there was actually an article that came out a couple of weeks ago that showed deals can be profitable for businesses of any size, but it works best on well-established businesses, like Nate’s, because it reinvigorates the customer base and tends to go viral more. Nate even said he got a lot of additional customers who weren’t just ones that purchased the voucher.

    @Bryan – I’ve had the same issue with email, but if you call the 800 number, you get a live person immediately and usually an immediate credit to your account!

  12. @leenoteca on said:

    The math is wrong. Quote; “Nate may ultimately spend $4,410 on the advertising campaign” The actual figure should account for the cut that LivingSocial received as well, thus 25% plus the %50 discount, equals $6615 for this bit of advertising.

  13. Thanks for pointing out the error!

  14. CCarr on said:

    As a newcomer to RVA (and a mom of 3) I appreciate the deals to be found as well as the opportunity to ‘test’ the local spots in lieu of the bigger chains. I’ve purchased from both sites and so far have enjoyed the experiences at the venues I’ve tried enough to return at regular cost. It does such now knowing that the companies don’t get as much return as I would think, having to split 50-50. But I think if the service is up to par, it’s a good deal in the long run, as you get customers willing to return again and again.

  15. CCarr on said:

    And having just found this website today, I’d be more prone to go to Nate’s just because it was mentioned (in a positive light) by the website!

  16. I bought the Living Social Coupon and have been back three times since. I have also brought two addtional people to check out the awesome food. I have to say the Living Social coupon had turned me into a Nate Taco Truck Stop addict!! My friends are hooked as well!

Leave a comment

Your email address will not be published. Required fields are marked with an asterisk (*).

Or report an error instead