Reader Kate Raynes-Goldie left this comment on my post The Butchers on Yonge Street: Group Buying Blowback?:
The deal that broke north american records is now officially a scam: the butchers have closed their doors indefinitely, for “renovations”: http://www.thebutchersorganic.com/
As you can see from Kate’s comment and my post, a lot of vocal people who bought deal vouchers for The Butchers were not happy with the service and many suspected a scam was afoot. Some of the salient excerpts from today’s message from The Butchers:
instead of spending money on advertising, we decided to pass on the savings to everyone who wanted to come in and actually try our food.
However, these online vouchers are a completely new form of marketing that we did not know how to use properly and it got us into a bit of uncharted territory. We want everyone to know that we honestly made a mistake by not running these promotions properly but we also want you to know that we are doing our absolute best to make up for this misjudgement.
When judging the number of vouchers that we could sell and handle, we went for big numbers since if you sell 1,000 vouchers that works out to about 3 new customers per day. Unfortunately, it has been hard for us to judge how much meat to bring in since it is a perishable product and we never know how many people are going to be coming in on a particular day to redeem their vouchers. Also, we thought that people would come in and use a bit of their vouchers over the course of the year versus coming in and redeeming the full amount all in one go. I’m sure it is not hard to imagine how quickly we can go through a refrigerator case full of meat when you have 30 people redeeming their entire voucher all at once.
Currently, we do not have enough refrigeration units and meat display cases to meet the supply needs of our customers.
We have considered a variety of options and have decided that we need to fix the layout of the store by increasing the number of refrigeration units to accommodate and properly supply our customers. It’s a tough decision to make to renovate the shop because we will have to close down for a few weeks in order to make the necessary changes so that everything runs much smoother in the future for our customers.
Until renovations are complete we can no longer honour vouchers. However please rest assured that once we open after renovations we will honour your vouchers.
And finally the kicker:
Finally, we want people to know that we did not make any money off of running these promotions. In fact, we lost a lot of money on each voucher that we sold but we chalked it up as a marketing expense and an initiative to get people to taste the difference between us and non-conventional meat. While we have seen many repeat customers from our promotions, we want everyone to know that we love “meating” new people every day and we are just a team of good people that made a mistake while using a new form of marketing. It was our fault that we’re in the situation that we are in but we just want all of our customers to know that we are doing absolutely everything possible to make the best of the situation.
While plenty of customers are crying “Scam!”, given the tone of this note, I am inclined to believe The Butchers’ story (but given the details on the comments below this is looking more and more like spin v. honest communication). And it sounds like a sad one for all parties involved, the group buying service included. Some thoughts:
- Do you think the group buying service that sold The Butchers the deal could have given them a little more advice on how to run your first deal? A simple checklist of questions like “Are you prepared if everyone redeems at the same time?” would have been nice.
- The Butchers could have handled this better. As soon as they realized they were in over their heads, they should have communicated to their customers in the same manner as they are doing now, with humility and transparency. It would have saved them a lot of headaches and it would have saved their reputation, which at the moment is pretty shattered.
11 Response Comments
Oh, c’mon now. Scam? Hardly. The internet is full of stories like this, and more pop up daily. Groupon, usually, is the culprit (I don’t know if they’re involved here). Participation in their deals has in many cases led to HUGE PR and customer service fails for local businesses who seriously had no clue what was about to hit ’em when they were approached about doing the deals to begin with. One long-time successful and awesome restaurant almost went bankrupt because of the way the deal was structured and ultimately run. I don’t think the fault lies with the local business owners, to be honest. Yes, they could probably ask more questions and put more thought into it – and certainly do more research to find out what to look out for from these deals gone bad – but I think the company selling the deals in the first place has to take the responsibility for laying out ALL the details and being responsive when problems arise. Also, in not being greedy in the first place. (I know, what a quaint concept.)
BTW just heard that they had run campaigns with ten different deals companies. If that’s the case it’s sounding more and more like scam to me, or else pure insanity.
The thing is there’s no way to definitively say scam or misunderstanding of consequences. There was another deal, not nearly as bad, where they sold between 3,200 and 5,000 vouchers for a spa. That would take between 2-3 years to fill!
These deal companies have no processes in place to prevent such deals from occurring.
If anything, they encourage these sorts of things. http://techcrunch.com/2011/06/16/groupon-sales-merchants-freaking-out/
The bigger the deal, the bigger the commission check for the sales rep.
Long term, this is bad for the deal companies as they end up having to do refunds for all of these deals gone bad.
Re: the note itself
So they’re going to expand to meet a temporary capacity need created by the vouchers that they likely won’t need after they’ve redeemed them?
That makes no sense to me either.
That would be a dumber business decision that running the deals. Better to close up shop and start a new entity.
Excellent point Rocky. Ok I am leaning even more towards “Scam” now. 🙂
Thing is, they ran 3 or 4 deals before their huge DealFind deal that kind of blew everything up.
Hard to argue innocence there. I’ve been going to them for like 2 years, and they had been struggling even before the big DealFind fiasco.
Hard to know whether this butcher business intended to perpetrate a SCAM or they just exhibited poor judgment and made some really inept business decisions here.
I pickup a lot of feedback from my local customers who are quite fearful of Groupon and the like, too many money losing examples abound.
While these group promotion deals can work for some local businesses, unfortunately for many others, these deals are simply not appropriate. Similar scenarios to this butcher happen far too often, and these unaware local businesses are not all out trying to run a SCAM.
We try to help our clients gain a better understanding of how these deals work. In the final analysis, a Groupon promotion is usually a very expensive form of advertising, not really a good deal for the local business. We can often help our clients come up with much more cost effective marketing campaigns that still generate good results.
In Chicago there seems to be an undercurrent of resistance among small business owners against Groupon and other group buying programs because what happened with the butcher isn’t an isolated incident.
Here’s an example of it happening in Chicago: http://www.dailydealmedia.com/512thirteen-year-old-successful-business-almost-ruined-by-groupon/
Hopefully business owners check out these articles and see that group buying CAN be good when it’s planned well but can go terrible if not.
@andrew shotland: i find it hard to believe this is not a scam. over a span of only 4 months, the butchers did a total of 12 different deals with 7 different companies, which violated the non-compete clauses that many of these companies had:
gary lipovetsky from dealfind says the butcher’s simply “ignored” their non compete clause: http://www.moneyville.ca/article/1016344–roseman-butcher-sold-21-000-coupons-can-t-meet-demand
not to mention, the butchers were passing off factory farmed meat as organic, which is at best, false advertising (i know, because i called their suppliers myself: http://www.k4t3.org/2011/04/02/the-dark-side-of-online-group-coupons/#updates)
can you really blame the coupon companies when the butchers simply didn’t play by the rules that were designed to prevent this from happening? they weren’t even selling the product they advertised.
the one thing the coupon companies should be held accountable for is giving customers refunds who want it. and sadly, that is where many (especially webpiggy and buytopia) simply aren’t delivering. that, you can blame them for.
Per the other comments, you all have swayed me over to the “scam” side of things. I have updated my post to reflect that.
Unfortunately this isn’t the first time I’ve heard of a Groupon going bad. The problem with Groupon, in my opinion, is they don’t do enough to prepare people for what’s coming. Groupon is a great asset if you know how to use it and capture the email address or phone number of the person coming in to use the coupon. Then it’s a marketing expense because now you can email blast or text message those people with new coupons every week (if the opt-in, of course). I read recently that the majority of people come in, use their coupon and never come back. I wish more business owners would realize how to properly utilize Groupon and make the campaign a success.