Some Groupon deals may be too good to be true -- unless you are the business owner on the other end. So goes the story of a small London bakery, which saw a year of hard-earned profits eaten up by a Groupon cupcake deal the bakery offered.
The owner of the small London bakery -- Need a Cake bakery in Reading, Berkshire -- had to make 102,000 cupcakes in a money-losing proposition after a Groupon deal she did became wildly popular. The owner, Rachel Brown, offered a 75 percent discount on the Groupon deal for 12 custom cupcakes that typically sell for $40.
The Groupon did the bakery offered was for $10 -- a hefty discount.
More than 8,500 people took the Groupon deal for cupcakes from the bakery, and the business' small staff was barely able to keep up with demand, much less turn out 102,000 cupcakes at a profit. The small London bakery owner said she lost more than $3 per batch of cupcakes and had to hire extra help to meet order demand. The cost of her Groupon deal was $19.500, enough to wipe out a year's worth of profits for the business.
It's been an absolutely nightmare, Brown told the BBC. Without doubt, the worst ever business decision I have made. We had thousands of orders pouring in that really we hadn't expected to have. A much larger company would have difficulty coping.
The bakery owner told The Telegraph that cupcake quality suffered from the unusually high order demand. Groupon, the Chicago-based daily deal Internet company, recently had a successful IPO but many have questioned its business model. Brown said she wanted to attract new customers, but the deal ended up being more than she and her small staff could reasonably manage.
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, Brown told the Telegraph. We are still working to make up the lost money.
A Groupon spokesperson told The Telegraph that there was no limit to how many coupons that could be purchased.
We approach each business with a tailored, individual approach based on the prior history of similar deals, said Heather Dickinson, director of International Communications told the newspaper.