How Not To Do Groupon (and lose £12k in the process)

Group discounts can be a nice thing for both the seller and the customers, but you have to know your limits. A UK baker learned that the hard way, when she was forced to bake 102,000 cupcakes, after offering a 75% cupcake discount onGroupon.

The discount obviously sounded too good to Grouponers, 8,500 of whom signed up to buy 12 cupcakes for £6.50 ($10), down from the standard £26 ($40) price. Rachel Brown, who operates the Need a Cake bakery in Woodley (near Reading, UK), had to hire extra workers and try to bake the cupcakes to satisfy the swarming customers.

“Without doubt, it was my worst ever business decision. We had thousands of orders pouring in that really we hadn’t expected to have. A much larger company would have difficulty coping,” said Brown, who lost up to £12,500 ($20,000) on the deal.

“We approach each business with a tailored, individual approach based on the prior history of similar deals,” Groupon’s international communications director Heather Dickinson told the BBC, adding that there was no limit to the number of vouchers that could be sold.

We’ve heard of small businesses having similar experiences before, and many of them aren’t too happy with Groupon. The lesson is clear: Groupon is a business tool like any other. It’s not for everyone, and its use requires careful planning – too large a discount, for example, can have unwanted consequences.

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