$20 Groupon For $65 Worth Of Cake Or Cupcakes

Business By ShaunPepe Updated 16 Sep 2011 , 6:28pm by Annabakescakes

ShaunPepe Posted 14 Sep 2011 , 6:10pm
post #1 of 23

I am sorry if the business that is running this groupon is on CC but this deal is all I can think about today, so I had to ask other CC's their thought. How do you think this business is going to make any money on this deal?

It is a www.dealfind.com deal. The company is offering $65 worth of cake or cupcakes for $20. Plus they will deliver for free! You can buy up to 5 coupons and they can be combined at once to get a larger cake or order. So far they have sold almost 470 and it is only 2pm.

I know the idea behind groupons is to get repeat customers, but this just seems like a huge loss. Am I wrong here?

22 replies
leah_s Posted 14 Sep 2011 , 6:16pm
post #2 of 23

No, you're correct. Many. many businesses find that Groupon turns into a money-losing nightmare.

KakeMistress Posted 14 Sep 2011 , 6:17pm
post #3 of 23

no your not wrong, most people never go back to the business after they have used their groupon... they just want cheap deals.

Annabakescakes Posted 14 Sep 2011 , 6:32pm
post #4 of 23

470??? Oh, Gawd, that makes me sick thinking of it!!!

Lesson learned?

KoryAK Posted 14 Sep 2011 , 6:34pm
post #5 of 23

They'll be sorry! We ran a Groupon and are having good success with it, but we are an open shop and didn't offer anywhere NEAR the loss that these people are!

emrldsky Posted 14 Sep 2011 , 6:49pm
post #6 of 23

Groupon can harm or help, depending on the business owner's understanding of the program. Many articles and blog posts have popped up from business that have been irrevocably harmed by Groupon, but I think part of that was on the business for not having a full grasp of the concept. However, Groupon, from what I've read, is purposely vague and avoids spelling it ALL out for the business.

KoryAK - What was your experience working with the people at Groupon and their willingness to lay it all out there for you before you signed?

StephW Posted 14 Sep 2011 , 6:59pm
post #7 of 23

So they are losing $45 per coupon X the 470 coupons they've sold so far = $21,150 in the hole. OUCH!!

emrldsky Posted 14 Sep 2011 , 7:03pm
post #8 of 23
Quote:
Originally Posted by StephW

So they are losing $45 per coupon X the 470 coupons they've sold so far = $21,150 in the hole. OUCH!!




Not to mention the buy-in to Groupon. I don't know all the details, but from what I understand there is an up-front cost you provide to Groupon. Being a small home-based business, I would never do that, but larger businesses could benefit.

FromScratchSF Posted 14 Sep 2011 , 7:05pm
post #9 of 23

I know someone (bakes out of a commercial kitchen, she does not have a storefront) that has worked the Groupon system so that she makes a killing and using them as her primary source of business selling crappy un-doctored Krusteaz cupcakes.

It can be done. If they are offering that type of deal then they know something you don't know and have created some great smoke and mirrors to make you think you are getting more then what you are.

ShaunPepe Posted 14 Sep 2011 , 7:36pm
post #10 of 23
Quote:
Originally Posted by FromScratchSF

I know someone (bakes out of a commercial kitchen, she does not have a storefront) that has worked the Groupon system so that she makes a killing and using them as her primary source of business selling crappy un-doctored Krusteaz cupcakes.

It can be done. If they are offering that type of deal then they know something you don't know and have created some great smoke and mirrors to make you think you are getting more then what you are.




hmmmm
I actually bought a coupon today for myself. It's my birthday in a few weeks and I figured for $20 I can get a small cake or 38 or so cupcakes. So I'll let everyone know what I end up with. Especially if I don't get what I thought.
They have a website and facebook page, looks like a one woman business, but I could be wrong.

cakestyles Posted 14 Sep 2011 , 7:40pm
post #11 of 23

I was going to say that it may work for them if their prices are quite high but if you can get 38 cupcakes (worth $65)...well, forget my initial thought. lol

Does her website say how much her cakes are per serving?

ShaunPepe Posted 14 Sep 2011 , 7:49pm
post #12 of 23

Her cupcakes are 20 for $35. Cakes start at $60 for a 6", $80 for 8". So maybe that is where she is hoping to make her money having people order larger cakes. But then you could just buy 2 coupons for $40 and then get $130 worth of cake. I'm interested now. I'll probably follow her on facbook now.

Annabakescakes Posted 14 Sep 2011 , 8:05pm
post #13 of 23
Quote:
Originally Posted by FromScratchSF

I know someone (bakes out of a commercial kitchen, she does not have a storefront) that has worked the Groupon system so that she makes a killing and using them as her primary source of business selling crappy un-doctored Krusteaz cupcakes.

It can be done. If they are offering that type of deal then they know something you don't know and have created some great smoke and mirrors to make you think you are getting more then what you are.




I REALLY hope that the baker in the Groupon "featured" here is doing something like that! $21,000 in the hole is just horrible...I seriously makes me sick to my stomach thinking of it.

I looked into it and quickly decided it was NOT for me.

KoryAK Posted 14 Sep 2011 , 8:41pm
post #14 of 23
Quote:
Originally Posted by emrldsky

Groupon can harm or help, depending on the business owner's understanding of the program. Many articles and blog posts have popped up from business that have been irrevocably harmed by Groupon, but I think part of that was on the business for not having a full grasp of the concept. However, Groupon, from what I've read, is purposely vague and avoids spelling it ALL out for the business.

KoryAK - What was your experience working with the people at Groupon and their willingness to lay it all out there for you before you signed?




They were totally up front with me and I also asked questions and made sure I knew exactly what was happening. We ran two Groupons. The first was the inaugural one for our state (and we got into an article in the paper about it too - bonus!) so their distribution was only about 10000 which is why we ran the second 6 months later (distribution of 60000 or something). We will not be running another just because we don't want to be a "coupon" place.

The first one was $10 for 6 cupcakes (retail $22). Most of the people came in and just got the 6 cupcakes so we changed the deal for the second one. We sold about 150 and had about 100 redeemed. We got $4.50 from Groupon for each one sold regardless of if they were redeemed. $4.50 covers my cost for 6 cupcakes since I am an open shop with staffing, lights on, and products on the shelves anyway - and it brought about 75 new faces into the shop. Even if those people never come back they still have had an experience with us and when a friend mentions us they can say so. So we received $675 and gave away $2200 worth of product but our COST on that product was about $880 - meaning I paid $205 for 75 new faces. Not too shabby.

The second one we ran was a straight $10 for $20 of product. Most people are spending at least the $22 for 6 cupcakes and the average high ticket is $42. When they spend additional, that greatly offsets the discounted cost. We sold 500 (we limited the number available and sold out by 2pm) and have so far seen about 174 redeemed (still good until December). If the trend on these matches the last one, we will be paid $2250 for $6700 worth of product - that really cost $2680 meaning $430 paid for about 250 new faces. Considering one 30 second radio commercial costs $38 to play, I'm ok with a guaranteed warm body for $2 icon_smile.gif

KoryAK Posted 14 Sep 2011 , 8:42pm
post #15 of 23
Quote:
Originally Posted by emrldsky

Quote:
Originally Posted by StephW

So they are losing $45 per coupon X the 470 coupons they've sold so far = $21,150 in the hole. OUCH!!



Not to mention the buy-in to Groupon. I don't know all the details, but from what I understand there is an up-front cost you provide to Groupon. Being a small home-based business, I would never do that, but larger businesses could benefit.




I have never heard of, nor did I have to pay, any buy-in to Groupon.

KoryAK Posted 14 Sep 2011 , 8:44pm
post #16 of 23

Also, most Groupons are strictly limited one per person (can buy a couple more as gifts) - this lady is crazy to allow them to be combined! lol

rainyone Posted 15 Sep 2011 , 12:30pm
post #17 of 23

http://www.dealfind.com/winnipeg/

They have one posted in my city. She bakes from home ( not legal) and does copyrighted cakes.... This is the second one she has run ( the other one was a couple weeks ago on groupon) First of all I can't imagine how much money she is losing, She is also putting herself out there in terms of publicity and not flying under the radar. She does disney cakes, other character cakes and can't imagine this is good to advertise. She claims to be legal but you can't bake out of your home here.

KellyJo3 Posted 15 Sep 2011 , 8:06pm
post #18 of 23

I did something similar to groupons, but it was for the troops which made it all worth it of course. I did a 50% off 1 dozen cupcakes and they could only purchase 2 per person. I actually ended up loosing so much money because not only did I offer them 50% off, but the company took a percentage.
It was worth it as far as being for the troops, but there is no way I coud afford to do something like that again. and trust me it did not bring in new customers like I thought it would.

Annabakescakes Posted 15 Sep 2011 , 8:43pm
post #19 of 23

The only way I can see it being worth it is if you raise your prices by at least 75% to 125% before you do the groupon or whatever. You could offer your "regular" or no-coupon having customers a discount. And do your groupon for something you do little or no business for. Like if I do very few cupcake orders and only charge $1 for a plain cupcake with an icing swirl, so I could "theoretically" raise my prices to $2.25 do a groupon for 50% off and make money, after they get their cut of it.

But I would (pardon the expression) crap my pants if I had 500 cupcake orders for 1 or 2 dozen! That is more than 6,000 and as much as 12,000 cupcakes!

But I have a separate kitchen in my garage and Ii live in a cul-de-sac, and have no store front, so my neighbors would crap their pants too if I offered someting like that, and i would lose my licence because am approved for 5 to 8 extra cars a week.

cakestyles Posted 15 Sep 2011 , 11:14pm
post #20 of 23

icon_biggrin.gificon_lol.gif

Anna we wouldn't want that to happen!! lol


Isn't the point of Groupon to get new customer leads? I don't think people offer these deals thinking that they'll make a profit...at least it doesn't seem like it.

I wonder how many Groupon purchasers never cash in their coupon. Maybe that's what companies bank on.

I feel bad for some of these bakers, it doesn't seem like they think it through before they jump in to this and it looks like they end up losing a lot of money.

Annabakescakes Posted 16 Sep 2011 , 1:21am
post #21 of 23
Quote:
Originally Posted by cakestyles

icon_biggrin.gificon_lol.gif

Anna we wouldn't want that to happen!! lol

Isn't the point of Groupon to get new customer leads? I don't think people offer these deals thinking that they'll make a profit...at least it doesn't seem like it.

I wonder how many Groupon purchasers never cash in their coupon. Maybe that's what companies bank on.

I feel bad for some of these bakers, it doesn't seem like they think it through before they jump in to this and it looks like they end up losing a lot of money.




No "we" wouldn't! lol!

louanne Posted 16 Sep 2011 , 5:51pm
post #22 of 23

we just done a groupon for cupcakes, it seems though most of them bought were actually by people who are already good customers,

there is not an upfront cost from a business, whatever the groupon price is business take 50% and groupon takes 50% mine are for 1 dozen plain( choc, or vanilla only) cupcakes and a 2nd one for 1 dozen specailty cupcakes, the groupons are sold 50% of normal cost, i am getting enough to basically cover my costs but since i dont feel it has brought enough new business i wont be doing it again, also have had aproblem with peeople calling saying...oh just give me an assortment send theri hubbys in to pick up then call and say they had wanted different flavors, to which i had to tell them, if you had ordered a specific flavor i would have made it but since you didnt you got an assortment of what our daily flavors were. I also had to make a rule that if you call in a certain flavor, i make it and then you dont show up to pick them up, you forfeit your groupon ( had a lady order some for a saturday pick up, she didnt get them and was mad because when i reopened on tuesday i would re bake her order.) So for me groupon has been a bust, but fortuantely i only allowed a certain number to be sold (50 plain and 50 regular)

Annabakescakes Posted 16 Sep 2011 , 6:28pm
post #23 of 23
Quote:
Originally Posted by louanne

we just done a groupon for cupcakes, it seems though most of them bought were actually by people who are already good customers,

there is not an upfront cost from a business, whatever the groupon price is business take 50% and groupon takes 50% mine are for 1 dozen plain( choc, or vanilla only) cupcakes and a 2nd one for 1 dozen specailty cupcakes, the groupons are sold 50% of normal cost, i am getting enough to basically cover my costs but since i dont feel it has brought enough new business i wont be doing it again, also have had aproblem with peeople calling saying...oh just give me an assortment send theri hubbys in to pick up then call and say they had wanted different flavors, to which i had to tell them, if you had ordered a specific flavor i would have made it but since you didnt you got an assortment of what our daily flavors were. I also had to make a rule that if you call in a certain flavor, i make it and then you dont show up to pick them up, you forfeit your groupon ( had a lady order some for a saturday pick up, she didnt get them and was mad because when i reopened on tuesday i would re bake her order.) So for me groupon has been a bust, but fortuantely i only allowed a certain number to be sold (50 plain and 50 regular)




So the business gets $10 for $65 worth of cake? icon_eek.gificon_eek.gificon_eek.gif I am scandalized!

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