By Alistair Barr
SAN FRANCISCO (Reuters) - LivingSocial, the second-largest daily deal company, launched its first product sales business on Tuesday, a move that creates a new competitor to Groupon Inc's Goods business.
LivingSocial Shop will sell discounted merchandise in deals that are tied to a theme. The first collection is called Beach Bound and includes towels, beach toys and a water bottle.
LivingSocial Shop sales will run for seven days and future collections include Lawn & Leisure, Midsummer Night and Back-to-School 101, the company said.
Daily deal companies usually offer big discounts on local services, such as nail salons and restaurants. However, Groupon launched product deals under the name Groupon Goods last year and the business has grown quickly.
"LivingSocial offering eCommerce products is a logical next step," said Jim Moran, co-founder of Yipit, which tracks data in the daily deal industry. "This is already a sizable business for Groupon, not to mention the entire flash offer industry."
LivingSocial has been testing product sales in Cincinnati for several weeks, according to Moran.
The company tested 15 product offers in the city in June and generated $39,000 in revenue. If the business is rolled out across the United States, it could generate about $187 million in annual revenue, Moran estimated.
Groupon shares were down 2.1 percent at $7.51 on Tuesday morning on the Nasdaq.
(Reporting by Alistair Barr; editing by Matthew Lewis)