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Baker Has to Make 102,000 Cupcakes For Grouponers
Rachel Brown, owner of the small Need a Cake bakery, became a victim of the old adage, "Be careful what you wish for. You might just get it." More than 8,500 people took Rachel up on her Groupon offer of a 75% discount on a dozen cupcakes, forcing her to make over 100,000 cupcakes to fill all the orders. In the end Brown lost almost $20k. "We take pride in making cakes of exceptional quality but I had to bring in agency staff on top of my usual staff, who had nowhere near the same skills. I was very worried about standards dropping and hated the thought of letting anybody down. My poor staff were having to slog away at all hours — one of them even came in at 3 a.m. because she couldn't sleep for worry," she told The Telegraph. "We are still working to make up the lost money and will not be doing this again."
Are people bad at math or something?
From their FAQ:
Can I set limits on my deals?
Yes. You can limit the total number of purchasers. You can also set restrictions on how customers use the deal. For example, if you're a restaurant you can limit the use of Groupons per table or per order.
BlackNova Traders
It's in groupon's interest to not let the client do that. They get vast sums of money from these "deals" and they know the system doesn't do the small business any good, because the couponers are pretty much all piss taking free loaders.
Stories in the press abound of small business retailers, particularly restaurants, living to regret making an offer on Groupon. These entities live on forming relationships with customers. Groupon brings in people who are only there to eat on the cheap and won't likely return.
Example story: http://posiescafe.com/wp/?p=316
"we met many, many terrible Groupon customers customers that didn’t follow the Groupon rules and used multiple Groupons for single transactions, and argued with you about it with disgusted looks on their faces, or who tipped based on what they owed (10% of $0 is zero dollars, so tossing in a dime was them being generous). "
Just replying to myself... Groupon does set that limit, and the fault is doubly with the retailer.
Rethinking email
The conversion rate for grouponers is abysmal. They are locusts out swarming for the next deal.
Good-bye
Other sellers have reported that the Groupon salespeople do their very best to convince companies not to put any cap at all on the amount of product available, downplaying the probability of just something like this.
This is hence similar to a lender trying to get someone to maximise their borrowing. You could argue that the bakery as a company is a professional business and has no excuse - on the other hand you don't expect bakeries to be masters of internet marketing either. It would make you legally correct and a jerk.
Nowhere in TFA does it actually say she lost $20k, and in fact the article is from The Telegraph and the business is based in London, so all currency in TFA is in pounds. In fact it says she lost between £2.50 and £3 per batch, which means she lost between £21,250 and £25,500, which would mean she lost close to $40k. More relevant to your comment, she lost £2.50 and £3 per batch selling at £6.50, so it costs her a little over £9 to make a dozen cupcakes which she normally sells for £26, so yes, she has some healthy margins, although not totally unreasonable for food products where you have an awful lot of waste (anything you don't sell by the end of the day is trash). Though I also don't really understand who the hell pays £26 for a dozen cupcakes.
Most baking is on a very low margin because of the bulk batches made by the Baker. Bread, Doughnuts, Pastries, and such can all be under 6% even utilizing 'expensive' ingredients like nuts and fruit. It's laborious, but only requires a few people to have any actual skill depending on the situation because of easy recipes.
I'm surprised she didn't approach a local culinary school if her cupcakes took such skill to prepare and create.
Well, for chain stores, sure. My wife runs a bakery - specialty cake shop - and margins have to be higher because of specialized ingredients, lower volume, personalized decorating, and so forth. It tastes a lot better than the bulk-produced stuff you get at Costco or Sam's or even the grocery story, but it costs noticeably more, too.
PHEM - party like it's 1997-2003!
Its this new metropolitan area fad of upscale cupcake stores. Ive had a few 'gourmet' cupcakes from one in Laguna Beach. It was ok, but not worth the $4 i paid for it and I'd never go back.
Good-bye
That's a normal price anywhere for high-end premium cupcakes. These aren't the dry little half-frosted cupcakes you remember from elementary school, these are basically scaled-down high-end wedding cakes that sell for $3-6 each individually, with a small volume discount. It's a trend that started with the Magnolia Bakery in New York City and went nationwide when the characters on HBO's "Sex in The City" raved about Magnolia. Every decent-size city in America has several cupcake shops these days, it's hard to throw a rock without hitting one. I can't believe you haven't seen them.
As a general real-world rule of thumb, a convenience item that would cost you $10 in a large US city will cost you £10 in a British one. Its about buying power, not nominal currency exchange rates.
You're special forces then? That's great! I just love your olympics!
I can buy pretty fine cake for $1, but I live in Eastern Europe.
Depends on the cupcake.
If you're buying a basic, churned-out-by-the-thousand cupcake from a cheap high-street bakery like Greggs (or for that matter from the supermarket) you will pay 50p-£1.
But there is also a market for a much fancier cake. Where it's made with butter rather than cheap cooking fat, where the chocolate is real, high-quality chocolate rather than cheap cooking stuff, where the flavouring is essence rather than artificial flavouring, where the decorating is done by hand and includes fancy shapes made out of florist paste as well as a generous topping of buttercream.
We're talking the sort of thing you could happily serve to guests at your wedding. The sort of thing that celebrities you see in glossy magazines (but would rather see on milk cartons, if you're in the US) buy. Not the sort of thing you pick up for a cheap sugar rush. These will sell for about £2-3 each.
I've known a number of businesses that got burnt by Groupon. One of the pubs we used regularly did a groupon deal and we went in and bought a lot of drinks with the meal. Most other people just asked for a glass of water and never came back.
There are two situations where Groupon works:
1) There is no cost to you (Gym membership) and there is a chance to up sell.
2) You have sourced an item at a ridiculously cheap price and even with Groupon taking 50% you are going to make a profit.
On (2), I knew somebody who sourced suits for $30, created a web site for the sales ploy, sold a 1000 units through Groupon at $250 and made a fortune.
Groupon can be extremely destructive to your business.
I've used Groupon for my business.
The idea is to consider it a marketing expense -you are paying for customer eyeballs (our estimate was we were exposed to 400,000 customers who had never heard of us before), not expecting to make a profit on the items that the Groupon customers buy.. but you don't want to actually LOSE money on any sales.
"You want to know how to help your kids? Leave them the fuck alone." -George Carlin
The fault of GroupOn is an inability to set limits in the number of coupons issued....If GroupOn allowed a limit to the number of coupons, say 2,500 then she many not have needed the extra employees and not suffered the losses from it.
You are absolutely right....except for that fact that you are absolutely wrong. Groupon DOES allow limits. I know I've intended to buy a groupon before but waited before purchasing, and when I later came back, the deal was over BEFORE the expiration because it reached the max quantity. Don't believe me? How about from the Groupon CEO himself:
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/09/17/businessinsider-groupon-ceo-posies-2010-9.DTL#ixzz0zp2ktgaQ
You really have no idea what running a business entails do you. The INGREDIENTS for a cupcake would cost cents, then add the labor, then add the rent, add the cost of the nice environment tables chairs whatnot, add the labor involved in managing both the bakery personnel and the service/sales staff as well as their benefits and insurance, and while I've mentioned it, insurance against idiots slipping and falling on a cupcake they dropped and suing, don't forget all of the overhead involved in running an office and paying for all those pennies worth of raw materials, balancing the books, advertising, There are many more costs that I haven't listed but I think you might be getting the point.
Just because you can make a cupcake for "cents" at home on your time with your equipment, by paying nothing for anything but ingredients DOSEN'T mean that you could do that as a business and stay in business and employ people.
New Orleans.
I'd not heard of this at all, till this thread...
Then again, who needs cupcakes, when you can run out here and get a plate of freshly made beignets, and cafe au lait....for a few dollars?
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
Does that actually exist?!
yes. £1.09 each
http://www.waitrose.com/shop/ProductView-10317-10001-110438-Cherry+%26+geranium+cupcake
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
Actually, if you knew anything about walmart you'd know that it most likely came from the same town, certainly within 100 miles of the store. Even with American's requiring overpay to do menial jobs, its still cheaper to bake locally than ship across an ocean. We have automation for the bakery and can the truck still has to drive them in from somewhere so we don't buy food from overseas.
On the other hand, guess where most American beef ends up? Not in the US!
P.S. Before you bitch about walmart, get a clue about whats really going on, bitch about the things they do wrong, not the the things you're too ignorant to realize they do right.
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