Groupon baker nearly ruined after bargain hunters flock to her 75% off web deal
Rachel Brown just wanted to drum up abit of extra trade for her tiny company when she offered her specialty cupcakes on discount coupon website Groupon.
But the businesswoman found she had bitten off a great deal more than she could chew when 8,500 customers took up her offer, forcing her to increase production from 100 cakes amonth to a staggering 102,000.
The unexpected popularity of the deal meant she had to bring in 25 agency staff who worked day and night to produce the cakes, and the cost wiped out her entire year's profit and nearly made her go bust.
Sour taste: Cake maker Rachel Brown outside her company Need A Cake, in Woodley near Reading. She was besieged with more than 8,500 requests after placing a discount deal on money-saving website Groupon
Rising to the occasion: Mrs Brown's staff worked night and day to meet the extraordinary demand
Mrs Brown offered subscribers 12 cupcakes - normal price 26 - for 6.50, a discount of 75 per cent, and expected a few extra orders.
But her small business, Need A Cake, in Woodley, near Reading, Berkshire, was overwhelmed by the response.
Need A Cake, which employs eight people, had to bring in up to 25 agency staff who worked into the early hours to meet the huge upsurge in demand.
Mrs Brown, 50, made a loss-making 2.50 per order and paid 12,500 for the extra costs of staff and distribution, wiping out her profits for the whole year.
She said: 'Without doubt, it's the worst ever business decision I have made. It's been an absolute nig! htmare.'
U.S.-basedGroupon offers coupons to its subscribers, which gives them huge discount deals on anything from restaurant meals to spa treatments.
Companiesthat sign up to the group-buying website hope to gain new custom out ofthe deal or sell extra goods during their visit.
MrsBrown's offer on the Groupon website stated: 'Twelve Cupcakes with a Choice of Flavours and Designs for 6.50 from Need a Cake. Value 26.
'Today's deal gets Groupon gourmands twelve individually decorated cupcakes from Need a Cake.
'Customers can construct their ideal cupcake, choosing from sponge flavour, icing and decoration options.'
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MrsBrown said: 'We only expected to get a few hundred orders out of it but we had thousands and thousands pouring in.
Sinking feeling: Need A Cake, which usually employs eight people, had to take on an extra 25 agency staff to meet demand, and in the process wiped out all the profits for the year
'We had to cut it off at 8,500 orders.
'As soon as we were! making, packaging and sending the cakes out we were on to the next order. It was non-stop.
'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.
'Even a much larger company would have difficulty coping, but my poor staff were having to slog away at all hours - one of them even came in at 3am because she couldn't sleep for worry.
'I've been running this business for 25 years and I thought I knew what I was doing, but this offer wasn't everything it seemed to be.
Fallout: One of Mrs Brown's employees Jo Walsby was given the unenviable task of fielding calls from angry cupcake buyers whose orders were taking longer than expected to be fulfilled
Boxed in: Need A Cake usually sells boxes of cupcakes for upwards of 26, meaning a 2.50 loss was made on each of the 6.50 Groupon offers
'We are still working to make up the lost money and will not be doing this again.'
Mrs Brown, who usually makes bespoke celebration cakes, has had to post a message on her website to inform customers the deal is no longer available.
She wrote: 'The Groupon offer is now closed. We regret that we cannot process any unused vouchers as they have now expired with Groupon.'
Heather Dickinson, Groupon's international communications director, said there was no limit to the number of vouchers that could be sold.
She said: 'We approach each business with a tailored, individual approach based on the prior history of similar deals.'
She added there had been 'constant contact' with Need a Cake and this was the first time she! had hea rd the company had experienced difficulties.
Mrs Brown has refuted this claim, saying she has written records of correspondence highlighting the problem.
Chris Moriarty, Corporate Affairs Manager at The Chartered Institute of Marketing, said: 'Groupon offers can be great for small businesses, but business owners do need to be very careful when they sign up to work with sites like this.
'Its easy to get caught out, and people who buy vouchers might not turn into loyal customers. Voucher sites are just one way of marketing a business, and business owners should look at all options.
'The Chartered Institute of Marketing wants to support small businesses, so were holding a free event on 2 December to help people understand how they can benefit from these sites, and how to avoid the pitfalls.'
WHAT IS GROUPON?
Groupon is a 'deal-a-day' website that offers a series of discount offers on a variety of products and services.
The website, at groupon.co.uk, offers a different daily deal such as a meal out, skills class or beauty treatment in participating cities - 36 in Britain so far. If you are attracted by a deal, you click 'buy now' and give your credit card details.
If enough people have committed, the money is taken and you're emailed back a voucher (or Groupon) which you redeem.
The company boasts that its collective buying power means it can offer discount prices while bringing together businesses and consumers.
HOW TO USE IT
The site is easy to navigate and very clearly laid out. On entering the website you pick your nearest city from a scroll-down menu. The offer is described in minute detail and limitations are highlighted. For example a deal of three microdermabrasion facials for 40, real value 165, is in a salon with 'edgy dcor'. Groupon vouchers have to b! e used w ithin a specified time frame.
BEST DEALS
Beauty treatment offers abound. with treatments and spa days frequently on offer. One treatment that has gained nationwide popularity thanks to Groupon is the 'fish pedicure' (where fish nibble at the hard skin on your feet), which is almost permanently on offer for less than 10. Other decent deals include car valet service for 10 instead of 25, cupcake decorating classes for 29 from 99, photography lessons for 30 down from 150.
DOWNSIDES
Deals aren't always available nationwide and are limited to particular cities, which may not be near you. Groupon has very few offers from big companies or well-known chains and is top heavy on beauty treatments.
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