LivingSocial to run national Whole Foods deal

LivingSocial co-founder and Chief Executive Officer (CEO) Tim O'Shaughnessy speaks during the Reuters Global Technology Summit in New York May 19, 2011.

SAN FRANCISCO (Reuters) - LivingSocial is set to run the first nationwide grocery store daily deal, teaming up with organic giant Whole Foods Market Inc.

LivingSocial, the second-largest daily deal company, said it will be offering $20 worth of products at any Whole Foods store for $10.

The deal is scheduled to run on Tuesday and is available to existing LivingSocial subscribers and anyone who registers for the service.

LivingSocial has agreed a cap of one million vouchers. Once purchased, buyers use a code to convert the voucher into a gift card in Whole Foods stores.

The daily deal business has grown into a multibillion dollar a year industry since Groupon started in late 2008. The two sector leaders have been expanding into different categories as they prepare for big initial public offerings, possibly later this year.

Groupon and LivingSocial have run grocery deals before, but those offers have been focused on small areas or niche outlets like gourmet butcher shops and bakeries, according to David Sinsky of Yipit, which tracks the industry.

It is hard for grocery stores to offer deep discounts because they already operate with thin profit margins. That suggests LivingSocial may be subsidizing Tuesday's deal, according to Sinsky.

In return for such a subsidy, LivingSocial gets to run what may be a popular deal, giving it the chance to attract a lot of new subscribers.

(Reporting by Alistair Barr; Editing by Tim Dobbyn)