Groupon Deal Leaves Cupcake Cook in the Red

 

Groupon – a website that advertises a ‘deal-a-day’ from television sets to coffee house deals – got a cupcake shop owner into a real pickle as she perhaps failed to read the small print.  The problem was, Rachel Brown – a professional baker and owner of ‘Need a Cake’ with over two-and-a-half decades in the business – somehow forgot to put a limit on how many cupcakes could be ordered.  Thus she received 8,500 orders and had to produce them for £6.50 a box instead of her standard $26 price. This resulted in a loss of $2.50 (nearly $4) per box!  On the error, Brown commented, “without a doubt, it’s the worst business decision I’ve ever made.”

100% More Cupcakes

Brown knew that her cupcakes were popular.  But perhaps she didn’t realize just how popular they were.  She usually bakes around one hundred a month, but due to the deal she had to increase this figure to 102,000!  Since she’d given out such a great deal, so many people responded and she actually made a significant loss on each of the orders.  This put her in a financial loss situation for the entire year! She ended up spending an additional £12,500 (almost $20,000!) on hiring more workers and other expenses to fill the order.  Usually the company has eight workers on staff; due to this order it had to bring in an extra 25 workers from an agency.

About

James Fishman has been involved in the world of online magazines for more than 15 years. He helped launch Sunstone Online and continues to improve the magazine as site editor and administrator. His writing focuses primarily business and technology. To be in touch with James, feel free to contact him at james[at]sunstoneonline.com.

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