Is Groupon, the daily online deal offering food or services at a discount, good or bad for small businesses? I know what Rachel Brown would answer.
Brown owns Need a Cake bakery in London. Via U.S.-based Groupon, she offered customers a dozen cupcakes, which normally cost almost $40 U.S. (yes, nearly $3.50 each), for $10. That’s 75 percent off, well beyond most of the half-price Groupon offers I’ve seen. Naturally, she was deluged with takers – 8,500 of them, to be exact. At a dozen each, that’s 102,000 cupcakes! (Didn’t know you’d get a math lesson today, huh?)
Brown quickly regretted her extreme good fortune. She had to hire 25 extra workers to fill the orders and lost about $20,000 on the deal, according to the London Daily Mail. She says she’ll never make that mistake again.
But who is to blame? Groupon? No one there forced Brown to sell her cupcakes so cheap. It was a poorly conceived idea to begin with – and one that should have had some sort of limit on the number of orders taken.
Groupon is a marketing tool. When it works, it’s a profit-maker. When it doesn’t, it’s a profit-taker. Like Rachel Brown learned the hard way, you can’t have your cupcake and eat it, too.