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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."
The 'Law of Unintended Consequences' strikes again!
75% off is a seriously deep discount, what did she expect would happen?
An enigma, wrapped in a riddle, shrouded in bacon and cheese
... be careful about the special offers you advertise online. Groupon isn't at fault here - if anything, the complaint is that it did its job too well. If you put a sign in your window offering a special offer, you can take it down whenever you want. If you stick something out on the net, you need to be very sure that you can handle a bit of scaling around the response.
Still, full credit to the bakery for actually meeting the orders. I suspect lots of far larger retailers would have tried to weasel out of the deal they'd offered in a situation like that. And so far as I can see from TFA, nobody is talking about lawsuits.
I seem to recall reading that Groupon allows businesses to limit the number of offers available. That is, rather than having to deal with 8,500 orders, Ms. Brown could have limited the offer to 100 (or some other arbitrary number) people.
If my understanding is correct and such a system exists, it would be foolish for a business to not use it.
I may hate Groupon, but this person has no one to blame but herself. Do the math. If you sell that many coupons, even if only a fraction of them are redeemed, that's a lot of cupcakes.
"Nature doesn't care how smart you are. You can still be wrong." - Richard Feynman
I'm sure she can do it. It'll be a piece of cake. 102,000 pieces.
There's a spot in User Info for World of Warcraft account names? Really?
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
Let them eat cupcake?
Having to work for a living is the root of all evil.
Groupon is great for business. Retarded small business owners not putting limits on their groupons are bad for business. Besides, she loses 20k now. She will probably gain 10x that over the next few years through increased exposure. That's 8500 customers that possibly would have never known about her shop.
Why didn't she simply limit the number of coupons that could be sold? I've seen other Groupons with limits. Sounds like she fucked up.
rooooar
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). "
"For the first 100 people" would have been a good stipulation on that groupon. That would actually serve the purpose of the offer. The first 100 would get cheap cupcakes sure, but the following of people after the first 100 would likely buy cupcakes anyway without the coupon because of the "well, im here, might as well" attitude a lot of people have.
She should take a hint from KFC, not fulfill the promise, and just delay it in courts until it turns into a $3 coupon years later that requires OCD record keeping to capitalize on.
Oh wait, this is a small business, those don't hold voting rights in our corporatocracy.
mov ah, 4ch
int 21h
The conversion rate for grouponers is abysmal. They are locusts out swarming for the next deal.
Good-bye
I don't see how Groupon can be considered long term viable, if this is the kind of press they're getting. This lady will never be doing that again, and she's going to go to her local chamber of commerce meetings and say, "I had a bad experience with Groupon". Any salesperson from Groupon will have an uphill battle selling to anyone in that area again.
How hard would it be for Groupon to make the default limit be a small number? If the business selects a large number with a large discount, then their forms could ask, "Can you really service this number of customers over this time?"
I know it's easy to blame the baker for this mistake, it's not a viable business strategy to kill your customers. Customers are supposed to be bled slowly, so that you can bleed them some more tomorrow.
All ideas^H^H^H^H^Hprocesses in this post are Patent Pending. (as well as the process of patenting all postings)
even with the discount it's $10 for 13 cakes that have a total ingredient cost of, I would guess, less than a couple of dollars. It seems like she should be able to make money on a deal like that, especially as she does not have to worry about the cakes going stale waiting for a sale. Also, she now has reached 8500 new customers, which was presumably the point of the whole thing. I suspect her business mistake is going into a venture where you have to sell a $2 cupcake, even when made in bulk, just to break even.
- Plus cost of labor (perhaps overtime?)
- Plus cost of gas + electricity + whatever to continuously pump out a huge order
- Plus cost of shipping (or whatever)
- Plus the delay you'll face making your regular orders, which might lose you customers
There's more to a thing than the some of the components: whether it's a baked good's ingredients or a iPhone's transistors.
What I found funny was her selling a dozen cupcakes for $40. What? Huh? Holy shit, apparently I'm in the wrong market. I do some off time work at a friends bakery every few weeks, and she sells a dozen cupcakes in a variety of types for between $3 and 5.
I'm guessing these are luxury cupcakes, made from pickled droppings of some 30 year old bear.
Om, nomnomnom...
Pretty sure the Groupon sales rep didn't, and even discouraged her from taking up that option saying that if the deal was limited to too few customers they wouldn't run it.
Sadly, Groupon doesn't care about the businesses that run the deals. As they continue to burn through their goodwill, promising "exposure" to a "new audience" that never translates into long-term sales increases, they'll eventually find it harder to con businesses into stupid deals. About that time, their stock will tank and they'll go bankrupt, exposing them for the Ponzi scheme they are.
I think it must really depend on the deal being offered. Groupon were spamming me every day about some (expired :S) mattress deal recently. I can’t imagine that offer would lead to much repeat business from a typical /. user, since they don’t tend to wear a matress out that quickly... However I did find a nice restaurant recently because of a discount I purchased from a different company, and I would definitely consider eating there again even without the discount. The same could be true of these cupcakes, if they’re good value without the discount, it should definitely lead to new business, just maybe not 20Ks worth...
£26 per bakers dozen cupcakes!? Is this a normal price? That's $40! Are these normal prices in London?!
This is only the latest GroupOn horror story, and many of them probably don't make the press. Personally I won't even use GroupOn because I feel so sorry for the retailers involved. It's a personal decision.
The next horror story will be from the people scammed by the IPO who thought that they were buying into a company that actually created something of value. Hard to believe that Google once offered billions ($5.75 billion, I believe) for this vaporware company -- and GroupOn actually turned them down. That was the luckiest turndown since Yahoo! refused Microsoft's (by today's standards) insanely generous offer.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
Groupon should offer a staggered approach. First 100 customers get offered 75% off. Next 100 get offered 50%, then 25%. After a time, the system could float to the discount that was optimal, with some total per day limit.
All ideas^H^H^H^H^Hprocesses in this post are Patent Pending. (as well as the process of patenting all postings)
Its much closer to $50 a dozen. Depending on the exchange rate, somewhere between 48 and 56. ON the other ohand, with all of the taxes in the UK, along with the cost of retail space, it is entirely possible that a buck apiece is reasonable there, with a 4-10% profit margin.
even with the discount it's $10 for 13 cakes that have a total ingredient cost of, I would guess, less than a couple of dollars. It seems like she should be able to make money on a deal like that, especially as she does not have to worry about the cakes going stale waiting for a sale. Also, she now has reached 8500 new customers, which was presumably the point of the whole thing. I suspect her business mistake is going into a venture where you have to sell a $2 cupcake, even when made in bulk, just to break even.
Or it could be the new business strategy:
1: Gain the notice of 8500 new customers with a major discount.
2: Gain the notice of everybody else with a news story about how screwed you were by GroupOn.
3: PROFIT!
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
Interestingly, I was just looking at a Groupon offer for a local cupcake business, offering up to 55% off one or two dozen cupcakes. I'm in a small(er) city, so don't think an event like this story shows will happen here. Hope not, anyway. I appreciate local businesses!
She probably didn't have time to think of approaching a school for work; a temp agency can have workers there in an hour.
The real WTF of this is her not putting a limit on the number of orders possible. That is possible, right?
I don't read AC A human right
If you're not taking all that into account, per cake, when you make them and price them, then you're NOT doing business. You're playing at business. That's a sort of school-yard sale way of running a business - fine for entertainment and keeping you busy, worthless for a business that employs staff and has overheads.
And most of that stuff scales linearly or better (except possibly overtime, but then more staff would have counter-acted that presumably) - if the oven stays hot, it uses less gas per cake than if it keeps cooling, if you're making a thousand cakes you can bulk-buy the ingredients, etc. Worst that happens is some sort of physical limit (can't fit that many cakes in the oven, and not practical to buy a new oven for a one-off mistake) but she's already taking on extra staff to fulfil the orders so that's probably not the bottleneck.
Seriously, if you're not pricing your goods/services to make about 50% profit at least with EVERYTHING taken into account (i.e. down to the last pinch of sugar and kJ of gas), you're really not doing business so much as making a living for yourself (where profit is, basically, optional). In that case, you SHOULDN'T be using Groupon or even placing an advert without knowing that because you'll be expected to be a business when the new customers roll in.
The only problems I would see would be time (she's not complaining that she COULDN'T get them done in time, just that it was hard and she lost money), capacity (ovens, ingredients, working space, etc., none of which she really states as the reason she can't fulfil an order) and staff training (How long do you need to learn how to cook cupcakes en masse? A day? What effect does a production-line system where one person handles only one job have on your production that you couldn't do before?). But if you normally make a profit on the odd cupcake here and there, then you should make a LOT more profit on thousands of guaranteed orders with only the minimum of upheaval in comparison.
You can either whine about it, or get out in the van at 4am that day, bulk-buy the damn ingredients and draft in every relative and friend you have to help, and enjoy a percentage of 8,500 new, satisfied customers.
Unless, of course, you're really not that bright at this "making money" thing - and are stupid enough to give away a basically unlimited license to people to produce cake orders at a loss for yourself. I have about as much sympathy as I do when one of the big supermarkets has to cancel a special offer because they realise that customers can actually combine offers, take advantage, etc. and come out with profit at the store's expense. None.
Ignoring GroupOn (because the horror stories abound, and all of them are down to stupidity of these people when they deal with the GroupOn salesmen and sign the contract): If her CAKES were suddenly wonderful and popular overnight and people were queueing out the door for them (rather than just a special offer), she would have still made a loss. That's an idiotic way to run your business whether you ever expect it to happen or not. Every cake, promotional or not, should make a profit and NEVER a loss. Or your business is better off JUST NOT MAKING THEM even in small batches. If it doesn't scale, you're doing something wrong and failing to adjust to the situation - almost everything profitable scales nicely.
Yeah, I would have jammed the door with my foot. That is one of the things you have to do in business, stop losses. I look for her to go out of business from this.
I object to power without constructive purpose. --Spock
Exactly.
How long do cupcakes take to bake? How much does the oven cost to run? How long do they take to cool before you can begin decorating? How long do they take to decorate? How long do the utensils take to clean between batches, plus the resources (water, soap, drying time) to do so? How much fridge space do you have, and how much do they cost to run? How much are you paying your staff? Note that for a big rush like this at least one of them will be on full-time register duty and unavailable for baking/decorating. Is anyone going to be free to take new orders (e.g. that couple that came in planning to spend a few hundred on a wedding cake...)?
The raw ingredients are one of the smallest contributors to cost.
PHEM - party like it's 1997-2003!
My mother in law worked for a groupon competitor. Groupon is known for purposly missleading and screwing their customers. The bad thing is that the businesses that are most likely to fall for it are little mom and pop places that may not survive.
"Twelve Cupcakes with a Choice of Flavours and Designs for £6.50 from Need a Cake (Value £26)." "Today's deal gets Groupon gourmands twelve individually decorated cupcakes from Need a Cake. Customers can construct their ideal cupcake, choosing from sponge flavour, icing and decoration options."
In the first paragraph, I think the author of the article erroneously concludes that this is the normal price. She might sell her cupcakes at a normal price of £7 and always tell customers they are a £26 value.
She only lost money because she had to hire other people. She had figured she would be fine if it was just her and her employees making the cupcakes. There's 8,500 people she's marketed to and with even a small fraction of returning customers she'll make her money back rather quickly. If around 5% returned just once or even a half of a percent returned several times, she'll still come out ahead in the end. It looks like her cheap marketing tactic just turned into an expensive one, but it'll still give her good numbers in the end. I would be ecstatic if that happened to me, but complaining about it gets you even more business.
Anyone who offers a sale below the cost of manufacture is seriously lacking in business sense. At worst this should only have netted zero. Any model where "the more you sell, the more you lose" is just stupid. That, and if you can't make a dozen cupcakes for £6.50 (~$13!) after cost, you should really give up baking.
--Not to be worried, Pitr fix.
Three words could have saved the baker a bundle of money and prevented a big headache.
My wife owns her own photography business (just her and an employee) and she had been toying around with the idea of using Groupon and LivingSocial. As much as she hates spreadsheets, I made here sit down and model what the deal looked like and what her break-even points were. Talk to your Groupon/LivingSocial rep. to get stats about similar deals (as much as they can give you)--quantity, conversion rate, customer conversion, etc and be conservative since the rep will definitely paint a rosy picture. After doing that, she made some very important changes to the structure of the deal she made with LivingSocial that protected her against some run-away scenarios that would have cost her money like this person ran into and the LivingSocial deal has been a great success.
The other thing, hinted at by the owner of the bakery is your brand. If all you're concerned about is pushing product and volume, then a low-end price for the Groupon/LivingSocial deal is the way to go. But be aware that the lower the barrier to entry the less the customer values you or your services. For service-based businesses (like my wife's photography company), a higher price for the deal is more likely to bring customers who value service and quality. You can still offer good discounts while having a higher price point by carefully choosing what you discount and what they are purchasing up front.
Bottom line: know who your optimal customer is and do the math or you're likely to get burned.
Faith is a willingness to accept something w/o complete proof and to act on it. Reason allows you to correct that faith.
Because you can still get a business loan from zombie banks to start a fucking cupcake business, but not to invest in actual productive capital.
"I assumed blithely that there were no elves out there in the darkness"
A few months ago a local restaurant had a Groupon which my wife purchased. It was a 5 course dinner for 2 for $20 on weeknights, or $30 for Thursday - Sunday. Within 2 days she received an email from Groupon stating that the restaurant was no longer honoring the deal. Groupon gave us a full credit (not refund, just money we could use towards another deal) Ever since this, my wife has not wanted to go back there.
The irony of this was that we discovered this restaurant through a different deal website, and it quickly became somewhat of a regular for us. Honoring a previous deal made us customers, not honoring a subsequent deal made us no longer customers.
Introducing Microsoft Vacuum 1.0 The first Microsoft product that doesn't suck.
You missed the point where the Groupon deal was for 75% off. When the discount is higher than your profit margin (not unusual for limited run loss-leaders to get people into the store) it's pretty much impossible to make money on that item. She is losing money because she's abiding by the agreement she gave her customers, not her normal rates. I think it's impressive she's holding up her end of the bargain even though she made a mistake. She should be commended for that and for setting a good example of customer care.
Her mistake was in assuming that Groupon coupons would have the same kind of low use rate that printed coupons do. Printed coupons serve mainly as advertising, and if a few people use them, that's a minor overhead. Groupon deals on the other hand have really high use rates.
I'm out of my mind right now, but feel free to leave a message.....
I'm not a fan of Groupon. It's a flashy fad that's bringing mass-marketing to the everyman, and launching lots of small businesses head-first into ruin. The people who would conceptually stand to benefit most from Groupon's reach are also those who can't actually afford the costs of unbounded promotion. My greatest beef is that Groupon keeps half of what you pay, so if a shop is offering a 50% discount, well the owner is actually getting only 25%. Groupon is printing giant piles of money for essentially running the most basic web advertising.
Cheapskates flock to the ridiculous bargains. Owners flock to the millions of eyeballs. Both get fleeced in the end, because you always get what you pay for. I've actually come to think less of businesses that advertise via Groupon, it is almost always a desperate plea for attention for a product or service that cannot stand on its own.
-Billco, Fnarg.com
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.
What is this "buying ingredients in bulk" tripe? She already does that. You don't get significant extra discounts for buying a whole lot more ingredients. It is food that is traded on a global market like anything else of real value, it only gets so cheap. Restaurant chains can work deals where they get kick-backs at the end of year if they purchase a certain amount during the year, but there isn't a novel formula where you can just get a better deal because you buy a lot. Food is gold! Do you expect a better deal if you buy many many ounces of gold?
I object to power without constructive purpose. --Spock
Mrs Brown said: "We had thousands and thousands [of orders] pouring in. We had to cut it off at 8,500 orders. As soon as we were making, packaging and sending the cakes out we were on to the next order. It was non-stop.
(emphasis added) Near the end of TFA:
Heather Dickinson, a Groupon spokeswoman, said there was no limit to the number of vouchers that could be sold. She said: “We approach each business with a tailored, individual approach based on the prior history of similar deals.”
Groupon absolutely allows merchants to limit deals. Merchants simply fail to actually do so.
I couldn't find the video, otherwise I'd put the link here, but a few months ago, I saw a video by 3 customers of Groupon: scuba dive shop, steak restaurant, and cupcake shop. Basically, Groupon takes 50% of the coupon value. So, if a merchant gives 50% off retail on the coupon, they only get 25% of retail. The cupcake shop experienced the same thing as this baker, but revised his idea of what Groupon is and is using it successfully. He now thinks Groupon is marketing with associated costs and just budgets accordingly. He also put some stipulations on the coupon: 1. No choice of flavors, you get what he has in stock and they choose what you get. 2. You must notify him advance (2 days), if you have a big order.
I just don't understand why Groupon doesn't set expectations properly with their merchants. When these bad things happen, all 3 (Groupon, Merchant, Customers) lose. Groupon loses follow-on business from the Merchant. Merchant gets overwhelmed and a bad reputation. Customers get a bad product or experience. If Groupon sets the expectations properly, I don't see why all three can't have a good experience. I assume the Groupon sales people are just pushing volume and don't have any training. But it should make sense that by setting expectations properly and coaching the Merchants, that Groupon would have follow-on business from the Merchant -- a much better business model than pushing a one-shot coupon.
You'd be amazed (actually you probably wouldn't) at the number of small businesses that are badly run - either because the owner doesn't really want anything more than a job (and so doesn't really plan for making it into a real business that can stand on its own feet) or because the owner simply doesn't know how.
...perhaps she should hire a BUSINESS partner, since she may be a terrific baker but crappy businessperson?
Doesn't take a PhD to say "let's say we offer a 75% discount....what sort of hit might we take?"
-Styopa
I know one business which has good results with Groupon. It's a riding school (horses). The Groupon lessons are an introduction to riding, with about an hour on the ground grooming and learning about horses, and an hour on the horse. Groupon insures that enough people sign up to make up a profitable group, and Groupon pays for no-shows in bad weather. This insures that each lesson brings in a known income. Some of the people discover they like horses and come back for more lessons. But even without that, it's profitable.
This is the right way to use Groupon - not as a traffic builder, but for something that's done in a group.
This is a bit like buying a TV ad and complaining that it is costing you money for the airtime. The idea behind groupon is that you attract new customers with crazy low one time prices. Of course it may cost money. Advertising always does. In the end all she should care about is whether or not she adds enough extra customers to purchase more than $20k, or whatever her costs were do to this promotion, later on down the road.
This is a problem well-known to those considering participating in Groupon. A minute on the web would have forewarned her that there could be a problem of scale. She could have limited the offering.
If Slashdot were chemistry it would look like this:Cadaverine
No, but your transport costs would drop (one HUGE transaction compared to many little).
A smaller baker in the UK probably gets their ingredients from the local "cash and carry" that *DO* offer discounts for bulk, and very small bakers that have only small custom normally might well not buy enough to take advantage of even USING one of those places (whereas someone making 8500 orders probably WOULD).
Not *everything* would reduce prices in bulk but certainly there will almost always be a small saving in terms of economy along the way if you buying HUNDREDS of times more than your usual method (e.g. hiring a fecking van for the afternoon to get all the ingredients in one go rather than taking your normal car / whatever back and forth ten times). And if you can't find a discount in bulk, you really need to learn how to source your raw materials.
Let the seller beware.
When you run the 75% off sale, you are supposed to first mark the price up by 150-200%. Nub got pwned.
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
Because you're buying them for an "occasion".
If you are tasked with providing dessert, stopping at wal-mart on the way to whatever occasion it is to pick up a dozen cupcakes for under $10 is tacky.
But if you stop at the "gourmet" Cupcake place and spend $40 on "special" cupcakes, that's OK.
You're really paying for the ability to buy your way out of having to actually bake without the social stigma of being too cheap/lazy.
paintball
As someone else mentioned: it was a 75%-off coupon.
Such things are usually for loss-leaders, meaning you're willing to give out a coupon (or have a sale) for something that you sell at a loss... in hopes that you either win a customer or while they're buying the cheap-item they're buying more.
VERY OFTEN, in retail people just take advantage of the loss-leaders... they come to the store just for that thing and are never heard from again until another huge sale. Sure, you win some customers but not everyone... and that's even when the potential customers are just in walking distance to your store.
That's the thing here... 75% is a enough off that I'd almost bet it would be a loss-leader.
Sure, you can make a dozen cup-cakes with pre-made mix and basic frosting for dirt cheap. But bakeries usually use higher quality... even at bulk I could see 13 fancy cupcakes costing more than $10 USD to make (between ingredients + labor + incidentals). Especially when have to work people overtime.
So I'm not surprised it was at a loss. Meanwhile, how many of the X-thousand "customers" do you think she really won over? Especially anon-Internet shoppers that would probably never visit the place again.
Not that I would ever do such a thing. I tend to avoid hanging out with people who would assign social consequence to buying the Wal-Mart cupcakes. But lots of people who don't operate that way.
paintball
...What's the price of advertising in all the newspapers etc that are covering this story?
paintball
The obviousness of Groupons scam is obvious enough to most but the more subtle one is the lie of advertising. Advertising does NOT work as advertised. That is something to remember, advertising is a product SOLD by advertising agencies. So the companies telling you advertising works because they studied it are advertising companies... conflict of interests?
You have two basics forms of advertising. The first people barely think about but is putting your products and your shop on display. It is not just the sign above your door but prices on your products. Think about this simple thing, did you EVER walk out of store because you couldn't find the price so thought "fuck this". BAD advertising. A lot about this basic advertising is convincing people to enter your shop because they think that what they want can be got at an acceptable price. For stores like bakeries this means charging the right amount for the right amount of convenience and quality. People complain about Starbucks being to expensive but they got fast steady quality service (compared to all the other alternatives at premium locations. I can get a cup at a burger chain for less next door at say Utrecht Central station in Holland but GOD the burger joints service is piss poor).
But if you want MORE customers then pass by traffic. What do you do... advertise? Do you READ advertisements? No? To busy. Exactly. Anyone that can afford a 5 dollar cup cake is far to busy to read the local newspaper. Same with banner ads. Who here sees banner ads? If you see banner ads, you are in a lower class. Elitist? Damn right.
Research has shown the Groupon's claims on age and income of their users are over-estimated. They are an older demographic and a poorer demographic. This is a group who hunts coupon's. They use a coupon and then don't come back unless they get another coupon. They are deal hunters.
If you got something to dump, then deal hunters might be worth going after but if you got a premium product that doesn't get 75% cheaper in total costs with bulk, then Groupon makes no sense.
Groupon works for HP Printers because HP makes its money on ink. It makes sense for products you need to shift now and you got to much off or make a very high margin on but otherwise, it NEVER makes sense.
Food products and services do not work with massive discounts aimed at bargain hunters.
It would be like selling Rolls Royce at 75% discount hoping for repeat business.
Not only do people not NEED two of them but those who buy it at the discount can't afford the regular price AND at the same time you are diluting the price of your product for your regular customers.
Or how would you feel if the person in front of you paid 1/4th of the price charged to you? If I was in that store behind a groupon customer and they tried to charge me full price they would be picking cupcakes out of their ears.
A european chain stunts with taxless days, basically a 20% cut that amounts to the regular sales tax. So... I never buy from them unless they run one of these events because I can wait for them or another chain to run one when buying a TV or such. Turn your customers into bargain hunters and bargains they will hunt.
Stay away from advertising unless you truly and fully understand what it is going to cost and what it is going to deliver you. It is like gambling. Or lawsuits. Casino's, lawyers and advertisers ALWAYS win.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
...the way you make Groupon work is you offer a deal that gets a customer in the door so you can sell them something else.
For example, a restaurant might offer a $20 food for $10 groupon. The restaurant gets $5 from the groupon, but hope you buy $40 in food and drink, and bring some friends with you, so they might get $80-$100 in full-price sales because of the $15-off groupon.
Another example is spas or photographers - offer a 50% off groupon for a basic service, then when the customer is in, upgrade them to more services.
But, if you've sold so many groupons that your entire operating capacity is eaten up just fulfilling the groupons, then you have no capacity for upsells, and you've killed your ability to upsell and thus make the groupon work for your business.
This business owner should have done a coupon for a half dozen cupcakes, limited it to a reasonable amount of groupons, then always tried to upsell the redeemer to a full dozen or two dozen cupcakes, and they might have made some money.
paintball
I suspect that with the loss came publicity that's going to prove to be worth FAR more than £20,000. The fact that you and me are talking about her small bakery in the UK is testament to that.
I think the neat thing here being glossed over is that she actually followed through on this, even going above and beyond to hire extra staff to meet demand. She could have easily played the "while supplies last" card, or done any number of other "shady" things to try and avoid fulfilling all of the requests. I know for a fact if this had happened somewhere around where I live, the proprietor would have fed a line of bullshit and invalidated the coupons or some crap.
On an other sight, she can see this as an add campaign that costed 20k pounds and that bring more than 8500 customers to her bakery. In those 8500 there might be a lot of new customers and of those there will be a part that may become new regular customers. So if this loss traduce in a sale increase in the long term, what appear here as bad move now may become a good one later.
Does anybody working in publicity could us tell if a 40k add campaing that bring 8500 customers to a bakery would have done well for the price?
I call bullshit. 6 pounds 50 should easily cover the cost of making 12 cup cakes - especially if you are making 102 000 of them.......
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It's only a matter of time before GRPN and their fancy IPO are dead in the water.
The vast majority of these Groupon deals are good for Groupon and no one else. Combine that with the fact that there are no obvious barriers to entry for their business model and there's a limited window for them to prey on idiot small business owners before word spreads that Groupon deals are not good for business and their company will be reeling soon enough.
Oh and yes, I really do emphasize *idiot* small business owners... You don't need a PhD in Economics to figure out that if you offer a discount in which you lose money on each transaction and don't set an upper limit to the number of transactions, your risk is not bounded.
They can claim they approach each business differently and try to help, etc etc. But I'd dealt directly with groupon's salespeople a number of times. They ALWAYS want an unlimited deal, and always ask for a higher percentage of the total profits if you want to set a limit. I think they must get a bonus if they bring unlimited deals in.
I bet they were selling like cupcakes.
Oh wait...
I'm mostly curious to what people's experience is
How many people bake? I mean real pastry baking, not the prepackaged mix.
How many people have been to a cupcake shop? I have a couple in my area, but they also make cakes.
I love to cook, in almost all forms: Cooking, grilling, frying, roasting, and baking.
I now some people are excellent at baking, and horrible at the rest, or horrible at baking but exceptional at the rest.
Baking is a more precise science. Everything has to be properly measured. Simple variations in ingredients or processing can have profound results.
There is a huge difference between All Purpose Flour versus Cake Flour; Instant Yeast versus Cake Yeast. And then there is the knowledge of how it all goes together.
Throw in frosting, and piping on whatever little decorations go onto the cake.
Now take the cupcake. It is smaller, has more surface area, and requires more manual labor (frosting is a pain unless you are really good at it).
Cupcakes are the least forgiving. It is a cake, that is not a cake. It dries out significantly faster than a regular cake due to its increased surface area. Even if the cupcake is perfect coming out of the oven, it probably will not be after several hours in a display case. And its not like a cake store wants to sell day old cupcakes. The frosting picks up aromas and what nots just sitting around. They are either given away or thrown out.
In other words... cupcakes are a royal pain in the arse...
I know several people who have dealt with Groupon, and Groupon was careful about setting reasonable limits with each of them. I guess YMMV depending on your sales rep.
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If you are tasked with providing dessert, stopping at wal-mart on the way to whatever occasion it is to pick up a dozen cupcakes for under $10 is tacky.
Life lesson: I never share a meal with anyone who uses the word 'tacky' to mean anything other than 'weakly adhesive.' It helps the digestion immensely.
From reading some of the linked blog entries, it sounds like some of Groupon's salespeople are lying to businesses or are being more pushy then the CEO intends. Perhaps Groupon has some salespeople who flat out lie to businesses who need to set sales limits? Things like this happen when a company grows very fast.
No, I will not work for your startup
Groupon has limits it can put on the amount sold, the owner should have thought about max capacity and sold under it. I'm also sure she totaled into the loss is the amount she did not make up in normal sales. Also most Groupons are good for a year, that is a long time to be able to make cupcakes. She should have put in a quota system on how many groupons she would book in one week and broke up the rest across the year. 200 cupcakes a week does not sound all that bad. Also if you put them off a bit people have a tendency to forget they have a groupon or lose it.
It's a good thing the offer expired before she hit the 640k limit.
You could stop at Walmart and buy their cupcakes, then remove them from the box and put them in your own containers. If your friends are looking for the label in order to judge you then maybe find better friends. This is essentially the American equivalent of the $40 melons in Japan, they're being bought in order to show that you can afford them.
I find this genuinely intriguing. If I'm cheap and lazy then I will be cheap and lazy... and confident:
"Yeah, I couldn't be bothered to spend 2 hours making small iced cakes for our potluck nor did I think it worthwhile to spend $39 on a dozen cupcakes when I could just get a Costco cake for a tenner. I see you brought fried chicken from Albertson's. Lemme get in on some of that..."
See? People confident about the insecurities derived from assumed social expectations help other people feel comfortable about their insecurities.
But that doesn't mean I don't understand. Some people feel very self-conscious about how they think they will be perceived. Some of those people have little choice but to associate with people who are genuinely judgmental about such frivolity. To them, I say, "Buy the $39 cupcakes and swap them out with the Sam's Club special. Keep the expensive ones for yourself just to spite those who would seek to evaluate you on the basis of the complimentary food you provide to others."
Quite honestly, if the people at the party I'm going to are too good for the $10 cupcakes, they can go to hell. Given the option, I'd probably buy 2 boxes of the $10 cupcakes, spend $20 less, and everyone would be happy.
"Those who would sacrifice essential liberties for a little temporary safety deserve neither liberty nor safety." - BenF
They did not lose $20k ... they spent $20k on marketing. If you're in business and you don't understand spending money on marketing your product, you're probably not a very big business.
No matter what you may believe on the subject, marketing can make or break a business, and good marketing is often worth spending a lot of money on. Just ask Coke, Pepsi, Dominos Pizza, Apple, etc.
It costs you $20k to fill orders at a loss for which your hope is that many of those people will either want to buy more at full price or create buzz about your product among their friends and associates. Eventually it will either pay off or not, but the immediate cost isn't worth discussing as though it were burned money.
- Michael T. Babcock (Yes, I blog)
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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I'm pretty much the same way. Heck my pantry is chock full of store-brand stuff because that's pretty much all I buy. For the most part it all tastes pretty darned close to each other. This is compounded even more when you're buying basic ingredients. In the target shooting community when people get to talking too much about tricking out their guns, there's a saying (and pardon me if this is perceived as racist): "It's the Indian, not the arrow that makes the difference.".
Heck when it comes to traditional southern cooking my grandmother was pretty much the best cook I ever knew, and her cabinet was filled with nothing but Piggly Wiggly brand stuff.
"People who think they know everything are very annoying to those of us who do."-Mark Twain
No, the supermarket sells a cupcake for $4 for 4. (/sarcasm)
How many supermarkets are there, and how could they all be the same?
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Groupon itself suffers no risk thanks to its business model. The clients, on the other hand, end up providing their services at 75% off (50% off from the client, plus Groupon takes half of the remaining 50%). In addition, the client gains no real benefit; the majority of any new customers they may get are stingy coupon-clippers who generally refuse to pay normal price for anything. In some service-based businesses, this may even include people who simply refuse to pay for the service done.
So I'm not surprised it was at a loss. Meanwhile, how many of the X-thousand "customers" do you think she really won over? Especially anon-Internet shoppers that would probably never visit the place again.
Very few. This all smacks of the same rubbish banded about in the run up to the first major dot-bomb bust: people giving away the shirts off their own backs to draw people in because eyeball count, get them in and eventually you'll make back what you've lost. Only for most businesses they simply doesn't happen. Too many are getting desperate and jumping in deeper than they should in the hope that they'll be one of the lucky ones, and there are going to be fwer lucky ones this time around: many of the markets already have long-standing 400lb gorillas manning the walls, and others require people to be willing to pony up for something new and exciting which with people being careful because of the current economic state (or being destitute because of the current economic state!) and the Internet not being novel and newly exciting to most people, is not likely to happen en mass.
After having been to some countries that don't tip compulsory, I sometimes really wish they'd introduce it. London wasn't bad, Japan had good service, but I really, really want to explain the custom of "bribery" to German waitresses. I'm sick of the times I've sat at a table of people with empty glasses wanting another beer while the waitress sat around and talked to the bartender. Once she gets your order, they stand around and talk some more. Eventually, they'll get around to brining you your God damned beer.
Meanwhile, you don't have to tip, but it is expected with expected service. Bad service deserves bad tips. This is usually included into the price of whatever you are buying in the form of the pay the service industry gets. I've been a waiter and a pizza delivery driver. I know what those people go through and usually tip well, but also have no compulsion to tip for bad service. I also know that they recognize return customers who are good tippers and give them the best service.
With the death of print such as local newspapers and magazines, they are becoming one of the few ways to advertise. While Google is getting better and better with targeting advertising on websites, most people spend lots of effort to make sure they never even see it. The problem with groupon seems to be that they do not advertise to the general population which you want because you might get further business, but rather to a population of cheapskates who will never return. Unless targeted localized advertising on the web becomes easy for the small business (at least as easy as Gorupon), then Groupon has a large selection of marks to fleece.
Getting the directed message out to 8000 possible customers for $20000 is pretty cheap. Local Ads are expensive and difficult.
IIRC the team at Planet Money pointed out that, in general, groupon keeps about half of what money they do collect. There is negotiation involved and Groupon tries to make the most astounding deal possible. She obviously failed at using any negotiation skills. If she offered her cupcakes at a 75% discount 26*(1-0.75) she was only pocketing around 3.25 after groupon took its cut. The Planet Money story is actually a really interesting discussion on price discrimination and the origins of couponing in general. http://www.npr.org/blogs/money/2011/04/08/135244697/groupons-secret-everybody-has-their-price
In other news, the Emperor's new clothes look maahhhhhvelous.
Jesus was all right but his disciples were thick and ordinary. -John Lennon
Ever been to London. The prices are crazy high on everything it like New York but cleaner and a hell of a lot more polite.
The lost leader is marketing tactic that everybody know so a lot customers are now doing the get in get the deal and get out before you end up buying something else well above market value. Take Wal-Mart they had a great deal on delissio garlic bread pizza recently. I fulled the freezer with that stuff and it was a get in and get out kind of visit you hang around a bit I guarantee that you will impulse buy something else. Rule number one of the savvy shopper is to never buy something when you don't know the average market price.
That why 9 out of 10 new business fail in the first year. You need and will usually fail at least a few times in business before you strike it big.
Yeah it not like printing 5000 mail flyers that 99% of peoples will throw away without more than a look when a customer buy a Groupon deal he or she is making a conscious choice and will cash it in at a really high rate.
You forgot to mention the thousands of kittens they kill each year to make them, too...
Then again, that's a positive.
I bought a piece of Orea Dream Cake from Deli Deluca in Oslo, Norway last night and it was $10. That's a little high, but pretty reasonable based on the fact that a dozen eggs here costs $8.
One, you wouldn't get a 75% discount no matter how much you buy.
Two, even if you did, you wouldn't get 75% off your other costs - rent, wages, power.
Three, you'd have to find somewhere to store it.
Four, it has a limited shelf life.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
In this case, the fools being the ones paying £26 for a dozen cakes. But then again, they're idiots who haven't got out of London, so they're probably not worth worrying about.
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Man, a million doesn't stretch as far as it used too...
The point wasn't to get to be a 'super rich multi-millionaire'. The point was to have money to retire on. In many cases, if people invested their money instead of buying lotto tickets, they'd have a pretty decent retirement. And, as Tyler mentioned - the marginal utility/'happiness' of a dollar does decrease the more you have. Money, after a certain point, doesn't buy happiness.
Back on lotto winners - there's plenty of evidence that most lotto winner's money skills are worse than average, given that the majority of multi-million winners end up declaring bankruptcy within 5 years of winning, and by 7-10 years most are back in the same financial situation as they were before winning.
I don't read AC A human right
Heck my pantry is chock full of store-brand stuff because that's pretty much all I buy. For the most part it all tastes pretty darned close to each other.
I'm with you here. Some store brand stuff isn't very good, but at least try it to find out. It's usually so inexpensive it doesn't matter. And those shopper cards. It's a whole new game for me. Nothing even gets in the cart that isn't on sale. Not on sale means I find an equivalent and is on sale or I skip it that week. I don't have the time or desire to extreme coupon, but it is a fun game to see how much I can save on a single $100 grocery store trip. So far my best has been $42 + the 2% cash back from the AMEX :)