Tue November 22, 2011
Too Sweet A Deal? British Cupcake-Maker Says She Was Burned By Groupon
Originally published on Tue November 22, 2011 1:31 pm
Sometimes, there is such a thing as too sweet a deal. A British cupcake-maker decided to offer a Groupon deal that she says wiped out any profits she had made all year. If you're not familiar, Groupon is an Internet coupon company in which businesses offer deals to lure new customers into their shops.
As The Telegraph explains it today, Rachel Brown, owner of Need a Cake, offered 12 cupcakes for $10, when a dozen cupcakes usually run about $40. As the Telegraph puts it, Brown had no idea her deal would be so popular:
"[Brown] was besieged by 8,500 people who signed up for the £6.50 bargain.
"She ended up losing between £2.50 and £3 on each batch she sold. She also had to pay £12,500 for the extra costs of hiring staff and sending the products out, wiping out profits for the year for her business.
"Mrs Brown, who had only expected a few hundred orders, said that the experience was 'without doubt, the worst ever business decision I have made'.
"'It's been an absolutely nightmare,' she said."
The BBC points out that Brown's business was only used to about 100 orders a month. After the 8,500 orders were filled, Brown's shop ended up making 102,000 cupcakes.
Here's what Groupon told the BBC:
"Heather Dickinson, Groupon's international communications director, said there was no limit to the number of vouchers that could be sold.
"'We approach each business with a tailored, individual approach based on the prior history of similar deals,' she said.
"She added there had been 'constant contact' with Need a Cake and this was the first time she had heard the company had experienced difficulties."
Now, Groupon's popularity is known to overwhelm businesses. There's even a Facebook page devoted to "Groupon horror stories."
Back in 2010, a shop owner in Portland laid out her Groupon experience in a blog post that got a lot of attention. In it she explains that Groupon offers no limit on the sales and explains that Groupon keeps a sizable percentage of the deals sold. That business owner also called the decision "terrible."