Another Groupon mess

[Jen473]

Photographers aren't the only ones getting screwed by Groupon.

Groupon horror: Bakery must make 102,000 cupcakes | GlobalPost

[Krusty79]

Wiped out a year's profits? Ouch!!! I thought this line was funny:

"one person came in at 3 a.m. because she couldn't sleep as a result of the cupcake stress."

A new syndrome!

Did you hear about the prostitute who used Groupon? j/k

[NathanFranke]

Don't these people do any research? Groupon is great for certain stores and restaurants. If you already have waiters and merchandise, you're paying for it whether customers show up or not. But if you have to make something, you won't make any money with groupon. You won't even be able to cover expenses, and then Groupon takes 50% off the "deal's" cost for their own. The baker is getting 5 bucks per dozen artisan cupcakes. You can't get a dozen Krispy Kremes for that price.

[andyw]

Originally Posted by Jen473

Photographers aren't the only ones getting screwed by Groupon.

Groupon horror: Bakery must make 102,000 cupcakes | GlobalPost

I disagree that they are "screwed by Groupon".
They are actually screwed by their own inability to properly target and restrict the offers they list.

I don't know but would assume that with any of these offers they can restrict the number to xx number and the time the offers are valid for.

For photography then the offer could well be a free sitting and free 8 x 10 or whatever. The hope obviously is to upsell the clients and at least make back your money. You restrict that to xx or whatever amount you want to limit any potential loss or to at least make it a number which you know you can handle over xx months.

For the cupcake lady, Sorry but more fool her for not realising that on an offer like that there was the distinct possibility that people would take her up on it.
Although there was potential to get new customers, the offer itself did not give her the chance to upsell the clients at the time and thus recover some costs.
If she was only doing a few a month normally and could not produce more without extra costs then again, more fool her.

[SwissJon]

Originally Posted by andyw

I disagree that they are "screwed by Groupon".
They are actually screwed by their own inability to properly target and restrict the offers they list.

I don't know but would assume that with any of these offers they can restrict the number to xx number and the time the offers are valid for.

For photography then the offer could well be a free sitting and free 8 x 10 or whatever. The hope obviously is to upsell the clients and at least make back your money. You restrict that to xx or whatever amount you want to limit any potential loss or to at least make it a number which you know you can handle over xx months.

For the cupcake lady, Sorry but more fool her for not realising that on an offer like that there was the distinct possibility that people would take her up on it.
Although there was potential to get new customers, the offer itself did not give her the chance to upsell the clients at the time and thus recover some costs.
If she was only doing a few a month normally and could not produce more without extra costs then again, more fool her.

+1

Marketing rule 101.. Only offer loss leaders if they lead to gains in the long run.. If you sell $40 cupcakes at $10 and you make a loss on each sale, and you have no long term plan as to how that's going to lead to extra money, you're probably going to go bankrupt anyway

Originally Posted by SwissJon

+1

Marketing rule 101.. Only offer loss leaders if they lead to gains in the long run.. If you sell $40 cupcakes at $10 and you make a loss on each sale, and you have no long term plan as to how that's going to lead to extra money, you're probably going to go bankrupt anyway

Whhhooaaaa! Did you get that from marketing genius Chris adval???

A year's profit is $20k? That's pretty sad.

[Biomech]

Not great maybe, but don't forget that's profit not turnover, that's after wages, tax, running costs, materials etc. If they paid all the staff a full time wage AND made $20k for next years capital, then that really isn't that bad.

[SwissJon]

Originally Posted by Biomech

Not great maybe, but don't forget that's profit not turnover, that's after wages, tax, running costs, materials etc. If they paid all the staff a full time wage AND made $20k for next years capital, then that really isn't that bad.

Perhaps for India... £12,500 is an awful profit for a privately owned company employing 8 people in the UK.

The money isn't being reinvested, it's the owners annual income and is about half the average wage. It probably isn't enough to pay the workers for a month and pay rent etc. I hope she has other means of an income.

[Doug Sundseth]

Depends on whether that was gross or net profits. If it was gross, you're right; they weren't long for the business world anyway. If it was net profits, depending on how the business was organized, they could be paying their employees a reasonable wage and paying themselves as employees as well, and then banking the profits at the end of the year. Note that reinvestment would be an expense and would come before profits normally.

That's one of the many reasons that taxing corporate profits is a fool's game. All you're doing is reducing the incentive to have money in the bank at the end of the year. Any competent corporation can structure its expenses to reduce or eliminate profits without actually affecting day-to-day business (or "profits" as a layman would understand the term). Bonuses and stock dividends, for instance, are expenses, not profits.