When Groupon love goes too far – bake your cake and eat it

24 Nov 2011

While the business picture for group buying sites like Groupon goes under the microscope, you can’t deny the social commerce site has been good for bringing business to many a small firm. But as IIA CEO Joan Mulvihill sagely predicted this year, what if it brings too much?

Yes, this is a hat-tip to Mulvihill, who earlier this year warned that firms need to be careful in case social commerce sites like Groupon brings them more business than they can profitably cater for.

Most people know how deals sites work, a notice goes out by email to thousands of people of a tantalising offer in their neighbourhood and a small firm gets the benefit if enough people take up the offer. But make sure you can deliver on that offer.

Over-baked cake

A baker in Berkshire in the UK got more than she bargained for when she had to bake 100,000 cupcakes.

According to The Telegraph, Rachel Brown, owner of a small bakery called Need a Cake, put an offer out on Groupon for a 75pc discount on a dozen cupcakes. When 8,500 people took her up on that offer Brown had to bake 100,000 cupcakes.

The entire misadventure cost Brown stg£20,000 and her staff had to work overtime to complete the order.

Brown would have been better off if she had heeded Mulvihill’s advice earlier in the year.

Mulvihill, who has previous experience working in retail groups in the UK, including Woolworth and Kingfisher Group, specialising in areas like supply chain management, was asked about what she thought of Groupon and the social commerce trend and warned firms to be careful in terms of over promising and then having to deliver.

She told firms: “Make sure you calculate the exposure for your business of a certain number of people taking up your offers. If everybody took up a deal in your restaurant, you could be working for free for a week.

“The idea is you give a better price and loads of value, which works well theoretically – as long as you work out the costings properly.”

Sage advice, indeed.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years