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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."
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). "
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.
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.