Marlon Pather, owner of The Butchers store in Toronto, sold a record 21,000 discount vouchers through several daily deal websites this spring.
He couldn't handle the traffic, leading him to limit redemptions. Last week, he stopped honouring coupons in order to fix up the 900 square foot shop.
“We will extend the expiry dates on vouchers for the length of time our store is closed,” says The Butchers' website. (They're normally good for a year.)
Pather admits he issued too many coupons, ignoring contract clauses that required a three-month pause between deals.
His failure to fulfill the demand he created has hurt both his own reputation and the credibility of group buying as a whole. Some customers feel they're being held hostage by deal sites such as Webpiggy and Buytopia, which won't give money back after 30 days unless a store closes permanently.
“We can't give refunds to everyone. It would simply close our business down,” says James Vettese, Webpiggy's marketing director.
Carol Niravong failed to get a refund from Buytopia for her three vouchers. She thinks buyers deserve their money back if the conditions change.
“I didn't have a problem until The Butchers started limiting hours and threatening voucher buyers,” she says.
Most businesses have coupon redemption rates of 15 to 20 per cent in the first few weeks, says Maria Balant, head of customer service at Buytopia.
“This deal ran during the Easter/Passover period and had a redemption rate up to 30 or 35 per cent.
“So, we extended our refund period to 60 days. And if there are problems beyond that period, we're giving a credit to buy something else at our site.”
An exception is Dealfind, which sold 10,000 store coupons at its website. It's giving a refund to anyone who asks.
“We told Marlon Pather he couldn't run deals on any other sites for 90 days. He chose specifically to ignore it,” says co-owner Gary Lipovetsky.
Pather has a new public relations spokesman and a Twitter account, @butchersorganic, to report on his renovations. (No tweets yet.) While keen to give his side of the story, he sounds naïve — though he's 36 and has been in business for 10 years.
Did he ignore the contracts he signed and run too many deals at once?
“You're 100 per cent right. I'm a very soft guy. My partner, Serena Para, is tough but she was on holidays,” he tells me. “The deals were so good that all the websites were pushing me. I said OK, let's do it.”
Federal meat inspectors told him to renovate since his cooler was too small, he said. He plans to start in mid-July and reopen a few weeks later.
He also plans to open a fish store across from The Butchers on Yonge St., but not until September. (A Webpiggy deal is good for fish as well as meat.)
“Boy, did I learn,” he says about his group buying experiment. “You've got to be very careful the way you plan it.” Offering $400 worth of meat for $100 was a mistake, since people came in to spend all the money at once.
“I tried to put on limits and they backfired on me. My regular customers stopped coming and the new customers weren't coming back. They were moving on to the next best deal. Goodbye, Butchers.”
Only 55 per cent of U.S. companies that did a daily deal promotion reported making money, according to a study released this month — while 27 per cent lost money and 18 per cent broke even.