Groupon: Bakery loses $20 000/Baked 102 000 Cupcakes

[Champion]

I am seeing this story everywhere:

http://www.msnbc.msn.com/id/45398235.../#.Ts12lfIr22s

Was this business owner this stupid? Sorry to be rude, but what did she think was going to happen? 75% off???

Poor planning. Does Groupon have a limit at all? She was giving 75% off. I wouldn;t be surprised with that many purchases. I see deals in EDM where over 3000 packs of 1 dozen are sold at 50%.

I don't know how well this works. To me a lot of people are probably bargain hunters and not repeat customers in the end. It still drives traffic though.

You are basically paying for marketing because what you get in the end would be peanuts.

The exposure just from this story is probably worth it now. I read she wanted to do a National deal, but groupon didn't recommend it. It gets frustrating when you see blaming their mistakes on others.

Groupon is almost business rape imo. They don't care about their main client (The business owner). They win and the customer wins.

EDIT - Yes she does admit her mistake. It's the blaming other people that is wrong.

[mrkajz44]

At least she admitted it was her mistake. I hate seeing the articles where businesses claim that Groupon ripped them off. Sorry, but if you can't figure out the business angle of using groupon then it's your fault. So many businesses think 'hey I'll get a Groupon and double my business' and when it falls on their face it's all Groupon's fault

[redforever]

It mentions in the story that she was charging $40 for a dozen muffins.

At those rates, she should not be seeing a loss at all, even at a 75% discounted rate. You can make a dozen muffins for less than $5 and that is with some pretty expensive ingredients like fruit and nuts.

[Hack&Lube]

They have $20,000 worth in publicity now...and I'm sure the loss is exaggerated unless she bought all her ingredients from Safeway

[CaramonLS]

Groupon is a great marketing tool when used correctly.

I'd think for a local bakery like that, it would be pretty great strategy if she made a good impression with the product she was able to create. This is especially true when you're marketing a product built around taste and quality.

Even if you get 2-5% of those customers returning, you've grown your business significantly.

[BlackArcher101]

What's a typical marketing campaign worth that can bring in 8,500 people, probably most of those being unique?

$20,000 for that seems like a deal.

edit: I guess that 20k is only for hiring extra help... that seems elevated. I guess if you want to include the lost money on each dozen, it would be over $50,000.

[Wormius]

It is more remarkable that she fulfilled the orders and didn't try to reneg on them. Places in North America would just let you buy the coupon and then tell you that you couldn't use it, or find some other way to get out of their responsibilities like raise the price by 75%.

[Wormius]

Originally Posted by redforever

It mentions in the story that she was charging $40 for a dozen muffins.

At those rates, she should not be seeing a loss at all, even at a 75% discounted rate. You can make a dozen muffins for less than $5 and that is with some pretty expensive ingredients like fruit and nuts.

A dozen cupcakes at Crave go for $31.95. Not that they're worth it, but the prices aren't unprecedented.

[Champion]

Originally Posted by redforever

It mentions in the story that she was charging $40 for a dozen muffins.

At those rates, she should not be seeing a loss at all, even at a 75% discounted rate. You can make a dozen muffins for less than $5 and that is with some pretty expensive ingredients like fruit and nuts.

You still have to count your labor, rent, other fixed expenses, etc. Your food cost alone is generally 22% - 28% IMO.

[CaptainCrunch]

$40.00 for a dozen muffins, those muffins better be attached to a nice set of legs in stilleto heels for that cost.

[Champion]

Originally Posted by Wormius

A dozen cupcakes at Crave go for $31.95. Not that they're worth it, but the prices aren't unprecedented.

That's who it was. Crave ran an ad and I remember they did like 5000 sales of a dozen each. They are all just cupcakes with different buttercream frostings. Nothing too fancy about that.

I bought some with the wife and i swear some just tasted like sugary wax. It's like they cheap out on ingredients.

[Champion]

I just read another article. She only bakes 100 cupcakes per month? How the heck did she stay in business. You should do that daily in a good location and 100 is small.

[Wormius]

Originally Posted by Champion

That's who it was. Crave ran an ad and I remember they did like 5000 sales of a dozen each. They are all just cupcakes with different buttercream frostings. Nothing too fancy about that.

I bought some with the wife and i swear some just tasted like sugary wax. It's like they cheap out on ingredients.

Buttercream and other stuff like fondant, I just don't understand. I cringe when I see a show like Cake Boss. I'd rather make my own, too.

Donuts on the other hand... I do really enjoy the maple-bacon from Jelly.

[redforever]

Originally Posted by Champion

You still have to count your labor, rent, other fixed expenses, etc. Your food cost alone is generally 22% - 28% IMO.

I can guarantee you that no matter what the ingredients, she is making more than 22% to 28% mark up on food costs. Plus, she can probably buy her ingredients wholesale.

I know she has rent, equipment, and labor costs, but at that kind of mark up, no wonder she never sold many muffins per week. No need to.

[blankall]

Originally Posted by Champion

I am seeing this story everywhere:

Groupon is almost business rape imo. They don't care about their main client (The business owner). They win and the customer wins.

I wouldn't call Groupon business rape at all. A friend of mine gained a lot of clients by giving away services for free on groupon.

I think the trick is to pick a price-point for Groupon that isn't a loss per units produced. Also, like others have said, factor in the savings from adverstisement. If you are going to chose between groupon and handing out thousands of flyers/cold calling/tv ads, groupon is probably better. That way you get them physically in the business and you can convince them of the quality.

[hillspeak]

Groupon is a cheap form of advertising. The fee they would charge and in this instance $20,000 is probably less then advertising on the radio or newspaper. If her product was good then she will get word of mouth traffic after groupon, plus she is now getting free advertising with the news story and for instance the 200 people who may view it on one site alone (Calgarypuck)

[Bend it like Bourgeois]

The people who sell daily deals typically do a shoddy job of setting customers up for success. But that's not unlike any media.

Group deals can work great if used properly
Do the math
Use the fine print
Scale the deal appropriately
Build a relationship

Should add, those thinking 20k is cheap have no sense of small business. Even if everyone was happy and long term it works, small businesses live on cash flow. A 20k hit is enormous. They have to live long enough to reap the rewards. Some businesses don't. Imagine a broker sold a cheap investment where there is likely a massive cash call - and didnt tell their client. they'd get sued, regardless of the long term value. This is the same.

[Regular_John]

I'm surprised we still see stories like this honestly, when the whole groupon thing started I wasn't surprised a few businesses got burned with this new promotional tool. I just chalked it up to growing pains for Groupon, but I mean most people have been aware of Groupon (and all big coupon sites) for at least a year now.

You'd think the basic "limit the coupons to what you can fulfill" mandate would be common sense by now.

[rd_aaron]

Originally Posted by jaydorn

I'm surprised we still see stories like this honestly, when the whole groupon thing started I wasn't surprised a few businesses got burned with this new promotional tool. I just chalked it up to growing pains for Groupon, but I mean most people have been aware of Groupon (and all big coupon sites) for at least a year now.

You'd think the basic "limit the coupons to what you can fulfill" mandate would be common sense by now.

Exactly. There was nothing stopping them from telling Groupon during the negoatiating process to put a limit, say 1000 or 2000 coupons sold.

[THE SCUD]

OP: Why don't you loan the poor baker some of your $300,00 a year!

edit: Do I have the right Oilers fan?