For many us as consumers a group discount can mean real savings and sites such as Groupon takes this idea and offers it to millions on consumers. So for the small business this could be mean big orders, but is that a good thing? When a UK based cupcake maker signed up with Groupon she could not have known just how many cake eating consumers liked the Groupon offer.
In fact, the offer was 75% off a selection of twelve cakes, this would normally cost £26 ($40), but with the discount the price came out at just £6.50 ($10), what a bargain that is and 8,500 consumers thought so too. As a result, the Need a Cake bakery had to bake 102,000 cakes and ended up losing £12,500 ($20,000) in the process because of extra costs etc.
According to Rachel Brown, who operates the Need a Cake bakery;
“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,”