4 Small Business Lessons from Whole Foods' LivingSocial Deal
If you doubt the current consumer appetite for daily deal websites, consider this: Whole Foods recently offered $20 worth of groceries for $10 on LivingSocial. The deal sold out in well under a day — 1 million deals in all, at a clip of 115,000 an hour.
Among other reasons the promotion is noteworthy: Most of the daily deal emails that hit the typical inbox are from smaller, local businesses, but Whole Foods is a publicly traded national chain. Another: That's a heckuva daily deal — $10 million worth.
But the offer's eye-popping popularity doesn't necessarily mean you should drop everything to do a deal yourself. Done right, you could indeed drive strong sales for your business. Done wrong? You might mire yourself in a months-long headache — or worse. The Whole Foods-LivingSocial promotion offers four longer-term reminders for small businesses to consider before they make deal.
1. Whole Foods can afford the markdown. (Can you?) Whole Foods is huge. Depending on the day of the week and the company's stock price, it's worth nearly $12 billion. Presumably, the company can absorb the $10 million discount. Even if you're working with much smaller numbers, you need to ensure there will be a return on the investment you make. Otherwise, a short-term sales wave might actually cost you money. In fact, Forbes points out that even Whole Foods probably took a big risk with its deal.
2. Whole Foods discounted products — not services. A key consideration is whether you’re a retail store like Whole Foods, or a service provider such as an accountant or housecleaner. If you get paid for your time rather than your products, set a high bar when answering the do-or-don't question about daily deals. Whole Foods is selling the same products on the same shelves in the same aisles; those aisles just might be more crowded than normal. A service provider, on the other hand, could run ragged fulfilling an offer, possibly at a money-losing rate.
3. Whole Foods can weather the demand storm. A million LivingSocial vouchers undoubtedly caused an unusual surge of shoppers eager to cash in, but Whole Foods has some lofty numbers of its own to match: 300 stores and 54,000 employees. They're able to meet the increased demand and are well-equipped to add temporary staff if necessary. Small businesses often don't have that flexibility.
4. Whole Foods offered the deal to everyone. Anyone — or at least a million anyones — could purchase the Whole Foods deal. That's an important distinction: Some businesses restrict offers to new customers only, which can upset existing customers. Unless you're opening a brand-new business, be sure to carefully weigh short-term sales against long-term loyalty.
Kevin Casey is a business writer for Intuit and is passionate about solving small business problems.