The potentially profitable daily deals market now mostly controlled by Groupon will witness a giant in e-commerce market entering into the same space, and the giant is none-other than Amazon. According to the Wall Street Journal (WSJ), Amazon is launching a daily deal program called Amazon Local and introducing its own deal-of-day discount offers in Chicago. Why Chicago? Amazon has taken this strategic step as The Windy City is the corporate home of Groupon. Amazon has its Amazon Local offering also available in Seattle, Boise, the Los Angeles area and Palm Beach, FL.

The e-commerce leader is teaming up with GroupOn rival LivingSocial for sales and services of the daily deal program.

“Customers already know and trust Amazon.com for their online purchases, and now with Amazon Local, they can also find great deals right in their own city,” the company said in a statement. “Amazon Local is a great way for residents of the Windy City to enjoy the restaurants, spas, and activities in their backyard.”

The WSJ also reported Amazon might start its own sales team for the later part of the year but as of now they are with industry experience LivingSocial, to speed up their service quickly. Earlier last year in December, Amazon had invested $175 million in LivingSocial for its expansion plan.

The local deals business has grown bigger and faster with more than 500 players jumping into it. And the competition is also starting harder to handle. Amazon, Google, AT&T, American Express, and others have already entered or are entering into same business model.

Google, which offered to buy Groupon in 2010, launched its own daily deal business called Google Offers this year. Google Offers is a coupon system allowing a store to deliver deals to Android phone as you shop. In most recent development, Google today acquired The Dealmap, a daily deals service launched in early 2010.

Continuing with acquisition and expansion, LivingSocial has acquired Ticket Monster Inc., one of the leading daily deals website in South Korea. This will open the gate of Asian market for LivingSocial. They have also operation in Thailand, Philippines and Indonesia, through the acquisitions of Ensogo and DealKeren.

Groupon is considered as the biggest player in the daily deals market. Foursquare, the hyperlocal social networking site recently started offering Groupon to its user-base alongside other daily deal partnerships. The deals will start with Chicago and later would expand to rest of the US and Canada as per the company statement. The partnership will further add more market capitalization to Groupon deals. But given Amazon previous track record in understanding the e-commerce market and its trust with customers and merchants by providing superior services, the one area that GroupOn lacks, it would slowly be a formidable Groupon rival than Google.