Daily deals gone wrong

New small business programs links deals with loyalty programs credit and debit cards
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Daily deals have skyrocketed in popularity in recent years, with both consumers and retailers eagerly signing on. Today, more than 60 million shoppers visiting the Internet's 80-plus daily deal sites each month, creating a hard-to-resist opportunity for attracting new customers. And while some businesses have enjoyed fast success with such promotions, others have learned the hard way that the deals aren't all they're cracked up to be. Here's a rundown of five daily deals that went particularly wrong.

Drew's Eatery

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A Chicago vegan restaurant owner blames its closing on a deal it offered through LivingSocial. The promotion – offering $20 worth of food for half the price – cost Drew's Eatery $20,000, forcing it to shut its doors for good two days before the deal was set to expire last December. Owner Drew Baker attributed the failed deal and the closing of the nearly four-year-old restaurant to being unable to get customers to spend beyond the offer to make up for his $35-per-customer expenses. Despite the misfortune, Baker wrote in a letter to customers that no one forced him into the deal and that he took full responsibility for its outcome. "We soon realized that these deals are not what they seem, but yet are silent killers and only build false hope," Baker wrote.

Need a Cake Bakery

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A London bakery found out last year just how eager people are to fuel their sweet tooth. A Groupon offering 75 percent off a dozen cupcakes from the Need a Cake bakery was so wildly popular that more than 8,000 customers took the small business up on its deal, forcing owner Rachel Brown into cooking up 102,000 cupcakes to please the hungry coupon-holding clientele. The bakery, which has only eight employees, had to bring in temporary workers to fill the orders, at a cost of nearly $20,000 – wiping out Brown's profits for the entire year. "Without doubt, it was my worst-ever business decision," Brown told the BBC at the time. "We had thousands of orders pouring in that really we hadn't expected to have. A much larger company would have difficulty coping."

Salon 505

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While a popular Austin, Texas, hair salon technically never publically gave a reason for closing down, its former head stylist believes a LivingSocial deal in 2011 was the final blow. In just 22 hours, 5,000 customers purchased the Salon 505's daily deal of a $99 half-day spa treatment valued at $550. After receiving complaints from customers about the salon's inability to book appointments in a timely manner, Austin's local NBC affiliate conducted an investigation that revealed the salon would need to give 14 half-day treatments every day for a year in order to honor all the deals. At the time, owner Sharon Baldeschwiler blamed LivingSocial for the incident, saying the offer was supposed to be capped at 1,300 deals, not the 5,000 that were sold. While she didn't comment on the closing, the salon's former head stylist Joe Jordan did, saying the daily deal was the beginning of the end. "That basically finished her up," Jordan told NBC. "If you do the math, there's no way."

Viper Auto Detail

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An Oregon car wash opted to be brutally honest with its customers after a bad Groupon experience. Last summer, Viper Auto Detail in Eugene offered customers a Groupon for $12 worth of services for $6. More than 600 customers took the company up on it, costing the small business thousands of dollars – and, in the end, the business itself. Feeling the anger from customers unable to redeem their daily deal, Viper Detail recorded a straightforward for those who dialed in to inquire about the business. "Sorry we ripped you off," customers heard when calling the store. "Your best bet is to go to Groupon and get your money back. We’re too chicken (expletive) to answer the phone, so you got this message anyway. Sorry for your problems. Better luck next time."

Food For All Market

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Some daily deal nightmares do have a happy ending. Last May, Philadelphia's Food For All Market got burned by not capping the number of Groupons available when it offered $30 worth of merchandise for just $15. More than 450 customers purchased the deal, costing the business $10,000 and putting it on the brink of closure. When owner Amy Kunkle announced in January via Facebook and Twitter that the market, which specializes in food for people with allergies, was closing after 16 months, her customers came to the rescue. Within days, Kunkle told Newsworks.org that two dozen customers had stepped forward to pledge loans totaling $50,000. "My customers came and saved my business," Kunkle said at the time. "That is unheard of."