LivingSocial (News - Alert) may soon layoff 400 employees at the daily deals company.

The number represents about 9 percent of the company’s workforce.

LivingSocial has about 4,500 employees, according to the company’s website. The company was hiring heavily in recent years and The Wall Street Journal estimated it increased its workforce almost tenfold since 2010.

The move was seen in response to recent lower growth in the daily deals and discount sector. LivingSocial saw a Q3 loss of $565 million, according to news reports.

“The long-rumored layoffs reflect a struggle to stabilize itself financially after a frenzied headcount expansion in 2011,” reported The Washington Business Journal, which broke the story about the layoffs.

The company has interested venture capitalists, though. They have invested more than $800 million in the five-year-old social commerce company.

The company had hoped it would raise revenue from its entry in July 2012 into the selling of merchandise online, like Groupon, TMCnet said. LivingSocial’s online shop offers between 16 and 20 items each week, which will likely cost between $40 and $50.

Other promising initiatives were LivingSocial Escapes and LivingSocial Families, which represented a quarter of the company’s revenue as of June.

LivingSocial is a key competitor to Groupon, which is having its own challenges. Groupon saw a Q3 loss of $3 million, news reports said. On top of that, after its November 2011 IPO, company shares fell more than 80 percent.

In contrast, in 2010 Google (News - Alert) offered $6 billion to buy the company – which was turned down.

Speculation mounted this week, too, if Groupon CEO Andrew Mason was going to be replaced. There is a “possibility that Mason, the 32 year old CEO and a founder of Groupon, may very well be seeing his last days at the company he started,” wrote TechZone360’s Tony Rizzo (News - Alert).

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