Groupon vouchers decision cost Berkshire business thousands
- 18 November 2011
- From the section Berkshire
A Berkshire cake maker has said it almost went bust after thousands more vouchers it offered on a group-buying website were redeemed than it expected.
Woodley-based Need a Cake offered discounts of 75% on cupcakes on the Groupon website and was unable to meet the sudden increase in demand.
Owner Rachel Brown said "Without doubt, it was my worst ever business decision."
Groupon said: "We are actively engaged with all our partners at every stage."
The US-based Groupon offers coupons to its subscribers, which give them discount deals on anything from restaurant meals to spa treatments.
Companies sign up to the group-buying website as a means of reaching new customers.
'Orders pouring in'
Need a Cake offered a deal of 12 cupcakes with a choice of flavours and designs for £6.50, which would normally cost £26. It received 8,500 requests as a result, substantially more than its usual production level of about 100 a month.
The company, which employs eight people, had to bring in agency staff to try to meet the upsurge in demand.
Ms Brown estimates the extra costs of staff and distribution could be up to £12,500, wiping out profits for the year.
She said: "We had thousands of orders pouring in that really we hadn't expected to have. A much larger company would have difficulty coping."
Heather Dickinson, Groupon's international communications director, said there was no limit to the number of vouchers that could be sold.
"We approach each business with a tailored, individual approach based on the prior history of similar deals," she said.
She added there had been "constant contact" with Need a Cake and this was the first time she had heard the company had experienced difficulties.
Chris Moriarty of the Chartered Institute of Marketing said businesses need to be aware when they are offering loss-leading offers online.
He said Groupon should offer a cap on the number of vouchers a business can offer.
"A limit on the number of vouchers would allow a business to properly plan. It is so easy to spread a good offer very quickly.
"There is so much more you can do with social media. Groupon is just one of many options and businesses need to assess what is best for them."