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Baker Has to Make 102,000 Cupcakes For Grouponers 611

Posted by samzenpus
from the be-careful-what-you-wish-for dept.
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."
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Baker Has to Make 102,000 Cupcakes For Grouponers

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  • by CanHasDIY (1672858) on Tuesday November 22, 2011 @01:06PM (#38137452) Homepage Journal
    The 'Law of Unintended Consequences' strikes again!

    75% off is a seriously deep discount, what did she expect would happen?
    • by JustOK (667959) on Tuesday November 22, 2011 @01:21PM (#38137760) Journal

      I don't think they understood what could happen when the passed that law.

  • by RogueyWon (735973) * on Tuesday November 22, 2011 @01:06PM (#38137466) Journal

    ... 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.

    • by Anonymous Coward on Tuesday November 22, 2011 @01:19PM (#38137718)

      Other sellers have reported that the Groupon salespeople do their very best to convince companies not to put any cap at all on the amount of product available, downplaying the probability of just something like this.

      This is hence similar to a lender trying to get someone to maximise their borrowing. You could argue that the bakery as a company is a professional business and has no excuse - on the other hand you don't expect bakeries to be masters of internet marketing either. It would make you legally correct and a jerk.

  • Limits (Score:5, Interesting)

    by heypete (60671) <pete@heypete.com> on Tuesday November 22, 2011 @01:07PM (#38137468) Homepage

    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.

    • Re:Limits (Score:5, Informative)

      by Anonymous Coward on Tuesday November 22, 2011 @01:10PM (#38137554)

      It's in groupon's interest to not let the client do that. They get vast sums of money from these "deals" and they know the system doesn't do the small business any good, because the couponers are pretty much all piss taking free loaders.

      • by maeka (518272)

        It's in groupon's interest to not let the client do that. They get vast sums of money from these "deals" and they know the system doesn't do the small business any good, because the couponers are pretty much all piss taking free loaders.

        Not only does Groupon allow businesses to set a limit, it very clearly is in Groupon's best interest to do so.
        If Groupon partners overextend themselves and deliver shitty service nobody will use Groupon.

        • Re:Limits (Score:5, Interesting)

          by Loether (769074) on Tuesday November 22, 2011 @01:27PM (#38137872) Homepage
          My wife uses Groupon all the time and so by extension I use Groupons. I hate them for precisely the GPs reason. Retailers ask if you are using a Groupon. If you say yes you almost always get substandard treatment/products. The companies who use Groupon overextend themselves and then hire temps or decrease quality to cover for their mistake. It's bad for businesses and bad for customers. The only one it's good for is Groupon.
  • by pyite (140350) on Tuesday November 22, 2011 @01:07PM (#38137472)

    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.

    • by Anonymous Coward on Tuesday November 22, 2011 @01:25PM (#38137838)

      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.

      The point is that promoting your business via Groupon is very often a big mistake, unless you have a lot of perishable unsold inventory.

      Selling via Groupon doesn't do much to build your business, since most Groupon buyers are cheap - instead of looking to become regular full-price customers, they will look for the next Groupon.

      The customer is loyal to Groupon, not the businesses that sell via Groupon.

      • by zazzel (98233)

        The customer is loyal to Groupon, not the businesses that sell via Groupon.

        Any of these marketing devices do that. In my city, you can buy a coupon book for a (rather long) list of restaurants (usually two meals for the price of one). Behaviour? You buy the book, take your s.o. and then visit every place exactly ONE time. The book will last you a year. Next year: same procedure.

        The restaurants in there put themselves in a horrible position, since they have no repeat customers. If they drop quality, they will have bad reviews, too! So it's only profitable for restaurant owners who

  • Just 102k? (Score:5, Funny)

    by DWMorse (1816016) on Tuesday November 22, 2011 @01:07PM (#38137482) Homepage
    I'm sure she can do it. It'll be a piece of cake. 102,000 pieces.
  • Geez... (Score:5, Informative)

    by Ron Harwood (136613) <`ac.xunil' `ta' `rdoowrah'> on Tuesday November 22, 2011 @01:08PM (#38137494) Homepage Journal

    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.

    • Re:Geez... (Score:5, Insightful)

      by Fujisawa Sensei (207127) on Tuesday November 22, 2011 @01:14PM (#38137626) Journal

      Yes, people are very bad a math.

      As evidence I cite MegaMillions, Power Ball, and the continued existence of Vegas with its billion dollar hotel/casinos.

      • Re:Geez... (Score:4, Insightful)

        by MozeeToby (1163751) on Tuesday November 22, 2011 @01:19PM (#38137726)

        Math and lotteries only don't work out if you base your math on the idea that $100,000,000 is worth 100,000,000 x $1. It is not. Above a certain number, large sums of money become "anything I want and never have to work again" which people value at much more than 100,000,000 times "a cheap cup of coffee".

        • Re:Geez... (Score:5, Informative)

          by Tyler Eaves (344284) on Tuesday November 22, 2011 @01:34PM (#38137990)

          Actually, you've got it exactly backwards. Marginal utility of each additional $ goes DOWN as the amount goes up.

          Look at it this way - Say I give you $1,000,000. For most people, this is absolutely life changing - pay the house off, do what you want for a few years, generally be secure. Now say let's flip a coin, double or nothing. Unless you are already quite rich, you should NEVER take that bet - $2m would be nicer, sure, but compared to the difference between $1m and $0, it's no where close to being twice as good.

          If the amounts go up a lot - to Bill Gates $1m would be essentially meaningless.

          • Re:Geez... (Score:5, Insightful)

            by Firethorn (177587) on Tuesday November 22, 2011 @01:52PM (#38138314) Homepage Journal

            Unless you are already quite rich, you should NEVER take that bet

            Yeah, but GP's point was that human's math sense is broken at those high levels. Those who can handle the differences and have certain other traits are the ones who get to be rich.

            Those who's math sense is broken worse than average are the types buying lottery tickets as a retirement strategy.

            Yes, the marginal utility of the next $ when NetValue=$1M is much less than when NV=$1. But humans typically don't think that way.

            You're doing pretty good if you can conceptualize that a million bucks is just a million bucks.

        • Re:Geez... (Score:4, Interesting)

          by Fujisawa Sensei (207127) on Tuesday November 22, 2011 @01:43PM (#38138152) Journal

          The math for the odds of winning powerball are 1 in a hundred million. (1 in a hundred M, 1 in 130 M, 1 in 200M same difference, roughly. ) and each dollar you spend increases those odds to $x in 100 million.

          According to today's XKCD you need to have over 4 million in investments, which mean that the only prize that really counts for never having to work again is the big one.

          So your odds of winning and never having to work again are very small until you start spending millions of dollars on tickets.

        • by rjstanford (69735)

          Another way of looking at it is like this.

          Buying no tickets costs $0 and gains you nothing, and you have absolutely no chance of winning.
          Buying one ticket costs $1 and gains you a pleasant few minutes of fantasy. Might be worth it, might not. It also gives you a real (yet tiny) chance of winning.
          Buying ten tickets costs $10 and gains you the same fantasy, but at 10X the price. You still have only a tiny chance of winning.

          Bottom line - buy no tickets, or one ticket, but never more than one. There's no ga

        • Hell, I value the fun discussions with my friends about what kind of crazy things we would do with $100,000,000, the day dreams about winning, and the jolt of adrenaline when checking for a (hah!) winner more than I value a dollar.

          For $1 a week I get to have all that and marginally support my local schools. Not many things as fun you can have for under 15 cents a day...

          With Vegas, too, it's actually quite easy to come out ahead:

          - Go to a casino that gives you a free drink if you put $20 in a machine. Put $2

      • Re: (Score:3, Insightful)

        by Dog-Cow (21281)

        A lot of people gamble for the fun of it, you know. There is value to the thrill of potential winnings, and that value may very well be greater than the dollar amount spent.

        Granted, there are a lot of suckers too, especially in Vegas.

      • Re:Geez... (Score:5, Insightful)

        by Nom du Keyboard (633989) on Tuesday November 22, 2011 @01:48PM (#38138270)

        Yes, people are very bad a math.

        As evidence I cite MegaMillions, Power Ball, and the continued existence of Vegas with its billion dollar hotel/casinos.

        You don't understand that buying a lottery ticket is more than just owning an almost non-existent chance of winning enough money to actually change your life. It is the opportunity to spend a buck or two and spend several very pleasant days fantasizing about what life would be like if you do win. Seen that way, it isn't a bad bargain at all. It's certainly better than spending that couple of bucks on some high fructose corn syrup favored carbonated water that's tough on your liver, metabolism, and overall health.

      • by Quila (201335)

        It's only being bad at math if a person expects to win.

        Playing for the hell of it or for the thrill of watching the drawing with money on the line is just fine. You paid your money for this form of entertainment just as you would have paid for any other.

      • by TheLink (130905)
        Regarding the lotteries, think about it from this POV:

        The odds of the typically poor people who buy lottery tickets becoming super rich multimillionaires if they didn't buy lottery tickets but instead tried other ways, is probably lower than if they did buy lottery tickets :).

        I generally don't buy lottery tickets[1], and I think the odds of me becoming one of those super multimillionaires are practically zero.

        Yes there are some poor people who become multimillionaires through hard work and some luck. But t
      • Do you have insurance? I bet you do... and it's almost the same thing; you are just betting on something bad happening to you (and probably hoping that it never happens). But in the end, insurance companies are not charities; they make money and plenty of it. On average, you will pay more in premiums than you will ever get back in claims, just like gamblers. So: don't gamble with money you cannot afford to miss, and don't take out insurance unless you cannot afford to self-insure.

        Math isn't the whole
      • Re:Geez... (Score:4, Insightful)

        by mr1911 (1942298) on Tuesday November 22, 2011 @02:36PM (#38139124)

        Yes, people are very bad a math.

        As evidence I cite MegaMillions, Power Ball, and the continued existence of Vegas with its billion dollar hotel/casinos.

        The common refrain "the lottery is a tax on those bad at math" is incorrect.

        The correct euphemism is "the lottery is a tax on hopelessness". For $1, they get a sliver of hope they will change their lives and live happily ever after.

        Go ahead and cite math. Go ahead and point out that lottery winners often blow through their winnings rather quickly and wind up no better than where they started. Go ahead and talk to yourself since logic and reason take a back seat to emotion with most people.

  • doh! (Score:4, Funny)

    by sgt scrub (869860) <saintium@yahoEEEo.com minus threevowels> on Tuesday November 22, 2011 @01:12PM (#38137578)

    Let them eat cupcake?

  • Very common (Score:5, Informative)

    by tripleevenfall (1990004) on Tuesday November 22, 2011 @01:12PM (#38137584)

    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 [posiescafe.com]

    "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). "

    • Re:Very common (Score:5, Interesting)

      by TheLink (130905) on Tuesday November 22, 2011 @02:17PM (#38138778) Journal
      I personally think the concept of near "compulsory" tipping as practiced by restaurants in some countries is messed up.

      At work I don't get tipped for just doing my job, and if my company's customers gave me money directly for just doing my job, or for doing my job differently/better than normal, that's called corruption or just plain wrong. Heck at some places you're not allowed to accept gifts/$$$ above a certain value (usually low, sometimes even _zero_) from customers.

      In theory if your employer isn't paying you enough to do your job, you should find another employer or another job. But in practice the "tipping" system is not likely to change in those countries...
  • by liquidweaver (1988660) on Tuesday November 22, 2011 @01:14PM (#38137614)

    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.

  • Groupon's fault (Score:5, Insightful)

    by Maximum Prophet (716608) on Tuesday November 22, 2011 @01:24PM (#38137812)
    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.
    • by caladine (1290184)

      I don't see how Groupon can be considered long term viable, if this is the kind of press they're getting.

      Additionally, I imagine there are quite a few people like me out there who only use groupons with businesses I already patrionize regularly. I find myself waiting for the next groupon to show up before purchasing what I would have gotten without it anyway. Great for Groupon, but not so great for the business in question. Doesn't much sound like a sustainable model to me.

  • by Nom du Keyboard (633989) on Tuesday November 22, 2011 @01:38PM (#38138058)
    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.
  • by Maximum Prophet (716608) on Tuesday November 22, 2011 @01:41PM (#38138116)
    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.
  • by Pitr (33016) on Tuesday November 22, 2011 @02:06PM (#38138568)

    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.

  • Do the math (Score:5, Insightful)

    by Temujin_12 (832986) on Tuesday November 22, 2011 @02:09PM (#38138612)

    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.

  • by Skraut (545247) on Tuesday November 22, 2011 @02:17PM (#38138760) Journal

    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.

  • by awjr (1248008) on Tuesday November 22, 2011 @02:28PM (#38138972)

    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.

  • by sunking2 (521698) on Tuesday November 22, 2011 @02:53PM (#38139352)
    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.
  • by SmallFurryCreature (593017) on Tuesday November 22, 2011 @03:31PM (#38139842) Journal

    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.

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