LivingSocial attempts a more hands-on approach to local commerce

In its latest experiment in local commerce, LivingSocial is getting hands on with a new events space in downtown DC. Called 918 F, the space hosts a variety of events including cooking classes, zumba sessions, pop-up restaurants, and painting classes with wine.

When LivingSocial CEO Tim O’Shaughnessy described it to me, I said it sounded like an adult education program.

“It’s a pretty unique experience,” O’Shaughnessy replied, promising something more.

It definitely is. The space is the most luxurious adult community center I’ve seen.

It’s housed in a beautiful building built in 1890 for the National Union Insurance Company. The alley alongside is the one John Wilkes Booth used to escape after assassinating President Lincoln. LivingSocial bought the building last year and completely renovated it. It features a beautiful cage elevator that was once manually operated (but has since been converted to push buttons. The walls are exposed brick and remnants of steel tubing from the original construction are still evident.

The place features multipurpose rooms, a bar, a lounge, a showroom, a restaurant-grade kitchen, and a cooking classroom with cameras that automatically zoom in on what the instructor is doing at the moment.

The front desk resembles that of a luxury hotel. More than the daily deals that the company is known for, the venue exemplifies what I think of when I hear the words “LivingSocial”.

The company has partnered with a variety of local businesses to make it happen. The space has featured pop-up restaurants from DC’s culinary avante garde, including chef Mike Isabella, who tested the concept for Bandolero, a new Mexican restaurant that is scheduled to open today in the district’s Georgetown neighborhood.

O’Shaughnessy sees 918 F as a way for LivingSocial to provide more revenue opportunities for local businesses. Restaurants have high fixed costs for space and can’t easily expand. They also have high marketing costs for testing new concepts. With the flexible space that 918 F provides, restaurants don’t incur the space cost. Using LivingSocial’s mailing list to attract customers, they also don’t have upfront marketing costs.

For LivingSocial, it’s a way to entice people on its mailing list who might not have been interested in discounts. “It’s about introducing the brand to people on the list who haven’t purchased before,” said LivingSocial spokesman Andrew Weinstein.

“It’s not about the discount, it’s about the experiential,” said Robert Hannigan, who oversees 918 F as the general manager. He was previously a general manager at Kimpton Hotels, a boutique hotel chain. Talking to him, it’s clear that he has a passion for hospitality and connection among his guests.

“We’ve seen friendships growing out of these events,” Hannigan said.

As a consumer, I’m a big fan of the space. If I still lived in DC, I would probably go there several times a month. I would love to try their sippin’ and paintin’ class, which combines painting with wine. I’d take my eight-year-old niece to their cooking-with-kids class. I’d probably hang out at the speakeasy. It’s a much classier experience than I had when I took Indian cooking classes at Arlington County’s adult education center, and some place I might consider taking a date. (I only took a tour of the space with Hannigan and Weinstein.)

As an advocate for small businesses, my views are more mixed. I like that 918 F is focused on selling experiences rather than discounts. Competing on price is a fool’s errand, unless you’re Wal-Mart. It’s better and more sustainable if you can offer differentiated experiences that people are willing to pay a premium for.

But I worry that in some ways it can be competitive with the local business community. If I spend time and money at a LivingSocial event, I’m not spending it directly with a small business.

Hannigan said the experience has been additive for some businesses. Restaurateurs would see the same customers dropping by their main dining room after an event at 918 F. After a cheese event, several people followed the cheesemonger across the street to the Cowgirl Creamery and bought cheese.

Some businesses have complained that LivingSocial is using their brand and disintermediating them.

“I blogged before how Yoga studios using living social was a bad idea,” wrote Mike Graglia, a yoga instructor in DC. “Now they seem to be getting into the business directly.  This is bad news for Yoga studios.  To the 575 people who bought this deal (as of 5 pm the day it came out), please go, there will be great teachers.  But you could have spent half as much and gotten 3 intro classes at the actual studio…”

“I think many of his peers would disagree with him on the value of an expandable space to reach new customers,” responded Weinstein. “We are working closely with local artists, instructors, chefs, and other entrepreneurs who want to use our space to reach new fans, introduce their craft, and make money, all at the same time.  If you run a small Zumba or yoga studio, you might not be able to handle a couple thousand new clients from a regular daily deal, so we give them an easy and low-cost way to do so.” Weinstein also said the complaint came from opening week, so there were glitches in communications.

But I have the most trouble with 918 F when I put on my investor hat. It may be a great small- or medium-size business, but it doesn’t seem like a venture-scale business. As a technology investor, I wouldn’t want to be putting money into a food and beverage operation. (Technically, the events space is set up as a joint venture.)

I just don’t see it scaling in a meaningful way. As of right now, LivingSocial is running two events a day on weekdays and five to eight events across Saturday and Sunday. Classes draw 25-40 people; pop-up restaurants draw 75-80 people per seating with up to 3 seatings per night, said Weinstein.

As I was walking around DC wearing my newly acquired LivingSocial  T-shirt, I encountered two people who stopped me to say they worked at LivingSocial. One was a dishwasher and the other a bartender at 918 F. And I gave Groupon flak for not being a technology company.

You can view more pictures of the venue in the following gallery.

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